Recovery Continues

Stocks Extend Recovery After Early August Sell-Off

• Last week, the Nasdaq 100 surged by 5.4%, the DJIA rose by 2.9%, and the S&P 500 gained 3.9% as US markets continued to recover from the early August sell-off. The US Consumer Price Index (CPI) report released on Wednesday indicated that inflation is under control, marking the first time in over three years that the CPI has fallen below 3.0%. This has fueled market expectations that the US Federal Reserve might implement its first rate cut at the September FOMC meeting.
• In Europe, the STOXX Europe 600 closed with a 2.5% gain. The UK's GDP grew by 0.6% QoQ, effectively ending last year’s recession. Although headline inflation in the UK increased by 2.2% in July, the market is still anticipating a rate cut by the Bank of England later this year due to sluggish growth in service prices. The implied year-end interest rate in the UK is currently 4.58%.
• In China, the CSI 300 edged up by 0.4%. However, July saw a 0.7% decline in new home prices across 70 Chinese cities, marking the 13th consecutive monthly drop. Despite a government rescue package boosting demand in major cities, smaller towns are still experiencing slow buying activity, highlighting the ongoing challenges in the housing market and the widening gap in recovery between urban centers and rural areas.

From Rebound to Reality: The Long-Term Struggles of African Equities

African equities, as tracked by the MVIS GDP index, rebounded by 27% from their early 2024 lows. However, the long-term outlook remains less encouraging. Since the index's inception in 2007, it has only gained 27%, indicating that it remained flat for nearly two decades as of early 2024. This disappointing performance may be attributed to ongoing challenges facing the African continent, including poor governance, inadequate infrastructure, and deficiencies in education.

This index is structured to represent the size of a country's economy rather than its equity market. It determines country weightings based on each nation's gross domestic product. The largest weightings are South Africa at 28%, Morocco at 16%, and Nigeria at 14%. The top holding is South African company Naspers Limited, renowned for its early investment in the Chinese tech firm Tencent in 2001.

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