Last week …
Was fairly quiet with the summer season now coming to a close. Turnover was up 8% on the previous week and should gradually improve as we move through September and retail investors become more active again.
Markets have been in a holding pattern over the last month or so with only small swings up or down. The Stoxx 600 finished down 0.8% last week.
The Middle East conflict continues to cast a sizeable shadow and strikes and retaliatory strikes continued into the weekend.
Monday had the lowest volumes of the week and London was closed for a bank holiday. Tuesday and Wednesday saw a global bond market sell off which resulted in European government yields soaring to multi year highs. Thursday was the busiest day of the week as markets rebounded, partly encouraged by Fed Governor Christopher Waller signalling he would support holding interest rates steady in September.
One sector that did not benefit on Thursday was luxury goods. LVMH and Hermes both dropped over 2% to their lowest price levels since 2020. This was primarily due to ongoing conflict in the Middle East and rising energy prices raising fears of a prolonged drop in demand for luxury goods from the Middle East market. The graph below illustrates how trading activity spiked in these stocks last week:
This week …
Is likely to start slowly before gathering momentum as the week progresses.
We have a US Labor Day holiday on Monday so a quiet start to the week is likely. Things get more interesting later in the week however with an ECB interest rate decision on Thursday and US inflation figures due on Friday.
The ECB is widely expected to raise interest rates by 25 basis points as high energy prices continue to exert inflationary pressure across European markets.
The US inflation update on Friday is likely to be the main economic event of the week. Friday’s US jobs numbers appeared to show a resilient jobs market and analysts currently price a US interest rate hike on September 16th at around a 60% chance. Friday’s inflation numbers will have a big impact on those calculations and so have potential to cause volatility in the markets going into the weekend.
New Federal Reserve Chairman Kevin Warsh has ended the policy of issuing forward guidance to markets when it comes to interest rates. This has created more uncertainty and a prompted a cautious approach from investors in the run up to rate decisions. Non farms payroll numbers and inflation updates are therefore relied more heavily upon as indicators of which way the next decision might go.
As we move towards the final quarter of 2026 there remains plenty of potential for volatility in markets. The Middle East and Russia/Ukraine conflicts show no signs of coming to an end anytime soon. Which means energy market volatility will remain. The US midterm elections are now just a couple of months away and with opinion polls pointing towards heavy losses for Republicans, you have to wonder what Donald Trump might do next in order to win back voters. We have some interesting weeks and months ahead of us.
That’s all from me, until next week… Happy investing!
Carl Rogan
