Market Commentary

International markets enjoyed a good August for the most part, despite the continued weight of trade tensions. Strong US corporate earnings and an expectation that the Fed will cut rates in September also helped sentiment.

Despite a pull-back into the Labour Day long weekend, US markets closed the month firmer as the S&P 500 edged up by 1.9%, the Dow Jones up 3.2% and the Nasdaq rose by 1.6%, recording its fifth month of gains. On the US economic front, headline inflation for July (CPI) remained constant at 2.7% YoY, unchanged from the June number, while Core CPI, which excludes energy and food, climbed 3.1% YoY compared to the June print of 2.9% YoY. The Fed’s preferred inflation gauge, PCE, accelerated to 2.9% YoY, the highest level since February, compared to the June print of 2.8%. US GDP for the second quarter of 2025 grew at an annualised rate of 3.3%, which was better than the expected 3.0%, and was boosted by consumer spending printing at 1.6%, and a drop in imports for the second quarter of 2025 on the back of the new tariffs. Fed Chairman Powel commented at the Jackson Hole Symposium, that the US may need to cut rates in support of the economy as the US job market appears to be in a fragile state. Note that the FED has kept rates unchanged for eight months.

The UK market saw a marginal climb in the FTSE 100 of 0.6% as bank counters pulled back at the tail end of the month on fears that a new tax on their profits might start to weigh. UK inflation printed at a higher-than-expected level of 3.8% YoY, compared to June’s 3.6%, with Core inflation rising 3.8% YoY compared to the June’s 3.7%. The BoE maintained a cautious outlook in August amid continued US trade pressures, and with inflation fuelled by energy and food hitting 3.6%, the MPC voted in favour of cutting the Bank rate to 4% from 4.25%. The MPC stressed that a cautious path for rate cuts is required to support the weak economic growth and softer labour markets against pricing pressures and stubborn wage demands.

European markets also experienced a challenging end to August as political uncertainty in France and trade uncertainty in the EU bloc weighed. The Dax closed the month lower by 0.7%, and the Cac by 0.9%. Eurozone headline inflation for July printed at 2.0%, unchanged from June and remains in line with the ECB’s inflation target of 2.0%, while core inflation for the region also printed unchanged at 2.3% YoY.

Asian markets had strong August as a softer Chinese economy primed investor hopes that the government will add more bailout measures to stimulate the economy. The Shanghai Composite ended the month higher by 8%, and the Han Seng by 1.2% as China focussed on efforts to promote growth in local chip production. On the economics front retail sales in July disappointed, printing at 3.7% versus the 4.8% June number, with depressed consumer sentiment, and no sustained growth in consumer spending impacting. Manufacturing PMI in China for August shrank to 49.4 compared to the July print of 49.3, while non-manufacturing PMI expanded to 50.3 from 50.1 the previous month.

In Japan, the Nikkei ended the month higher by 4.0%, with headline inflation for July declining to 3.1% YoY compared to the June print of 3.3%, reaching its lowest level since 2024. Inflation is still above the BoJ target rate of 2%. Industrial production in July also shrank more than anticipated, while like China, retail sales also disappointed.

South Africa

In South Africa, the ALSI continued its sixth consecutive month of gains, ending August higher by 3.4% with gold and platinum in the vanguard. Resources were the best performing sector, up 11.6%, followed by property up by 2.8%, industrials higher by 1.2% and financials up by 1.0%. Some selected outperforming shares for August were Curro Holdings, up 33.7% on the back of a R7.2bln buy-out offer from Jannie Mouton, Grindrod (+32.3%), DRDGold (+32.3%), Goldfields (+31.5%), Sasol (+27.2%), AngloGold (+19.4%) and Pan African Resources (+16.4%). Selected shares that underperformed were Telkom (-15.2%), Truworths (-14.9%), SSW (-13.1%), Foschini (-11.5%) and Aspen (-9.7%).

SA headline inflation for July crept higher to 3.5% YoY from the June reading of 3.0%, with core inflation also edging up marginally to 3.0% YoY versus the June print of 2.9% YoY. This was propelled by food inflation, as an outbreak of foot and mouth disease impacted on the beef price with the disruptions in supply. On the interest rate front, the consensus for rate cuts forecast the repo rate at 7% at the end of 2025, however, the latest poll sees another 0.25% rate cut factored in, bringing the year-end target to 6.75%.