Equity markets took a breather in August with most major stock markets finishing in negative territory. Despite Fed Chairman Powell indicating rates would be on hold for now, the US market declined 1.8% and the NASDAQ fell 2.2% following the release of Q2 profit results which showed in aggregate that earnings had declined by 5% over the previous twelve months.
The Australian market fared slightly better, falling by just 0.8%, dragged lower by weakness in the mining sector, impacted by expectations of lower commodity prices due to a deteriorating economic outlook in China which saw its market fall by 8.3%. While the global economic focus usually centres around the US, the European economy is teetering on the verge of a recession while China is struggling under the burden of a debt laden property and infrastructure sector.
The negative outlook for China dragged the Australian dollar down by 4% against the US dollar to finish at 64.8 cents. Bond markets were a mixed bag with US 10-year treasury bonds increasing 14 basis points to finish at 4.1%, whereas the Australian market was more subdued with yields declining by two basis points to finish at 4%.