WATCH: Animal spirits

Global markets ended their best month in two years strongly on Friday, with the JSE gaining 0.47% to 68,934 points, up 4.09% for the month, according to Infront data, while the top 40 was up 0.49% — having added 3.93% in July.  In the US, the Dow added 6.7% for the month, the S&P 9.1% and the Nasdaq 12.3%.

Markets were fuelled by some better-than-expected big tech earnings, which came after an expected 75 basis point interest rate hike by the Federal Reserve on Wednesday. However, the Fed’s tone was less hawkish, with chair Jerome Powell indicating the central bank could slow the pace of its rate hikes and that future moves will be data-dependent.

Asian shares were sluggish on Monday morning as we kick off the new month though, as disappointing Chinese economic data fed doubts Wall Street’s rally could be sustained, while the dollar continued its retreat on the yen as speculators were forced out of suddenly unprofitable short positions.

China’s official measure of factory activity contracted in July as fresh Covid-19 flare-ups weighed on demand, and the Caixin PMI also missed forecasts. This doesn’t bode well for the raft of other PMIs due this week, including the influential US ISM survey, while the July payrolls report on Friday is also likely to show a further slowdown.

US data out on Friday showed stubbornly high inflation and wages growth, while central banks in the UK, Australia and India are all expected to hike again this week. Let’s find out what the animal spirits are telling us with Chris Holdsworth, chief investment strategist at Investec Wealth & Investment.

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