- Global growth concerns, economic softness in China and timing of US rate hike led to a volatile month
- China modified the renminbi fixing mechanism to a more market driven methodology
- US economy showing signs of recovery, but inflation remains lackluster
- September “lift-off” remains “live”, but futures market pricing in only 38% chance
- China has the firepower to boost its economy
Global growth concerns, perceived economic weakness in China and the timing of the first US rate rise all took market focus in what was a very volatile August. Equity markets sold-off sharply during the month, the S&P index fell -6.3%, into negative territory year to date and the Vix (volatility) Index ended the month at 28.43, having spiked as high as 53.29 intra-day on China’s “Black Monday”; which saw global equities nosedive. Commodities continued their rout, but rebounded in the final days of the month. Having dipped as low as $42.23, Brent crude had a last minute rebound in the final three days of trading - off the news that supply had actually fallen in June, from April's peak - crude gained 3.7% on the month, however, we expect global demand to remain suppressed going forward. All of the above sent shivers through emerging markets with many currencies falling sharply; the Turkish lira, for example, fell 5.2%. The yield on the ten-year US Treasury was pretty flat over the month at 2.22%, however, it did swing about somewhat during the month, falling as low as 1.9% intraday on Black Monday.