Explore the monthly market wrap-up, a summary of the key trends, emerging players and market movements.

Key market movements that caught our attention in August:

Global Meltdown to Begin August

August has historically been a weak month for markets, with the ASX 200 averaging a modest 0.19% return, making it the fourth-worst-performing month of the year. This year, August seemed poised to be the lowest-performing month yet. In Australia, during the first three trading days of the month, the ASX 200 fell by a total of 5.53%. However, it wasn't just the ASX 200 that suffered; the early days of August saw a global market meltdown.

On August 5th, Japan's Nikkei 225 experienced a sharp 12.4% sell-off, while the S&P 500 dropped nearly 7% over the first three days of the month. The dramatic sell-off was driven by a combination of weak U.S. employment data and Japanese rate hikes.

U.S. Non-Farm Payrolls for July fell by 65,000 to 114,000, down from 179,000 in June, falling short of expectations of 176,000. This pushed the unemployment rate up to 4.3% from 4.1%, causing the U.S. dollar to drop 1.91% against the yen as markets speculated on an imminent rate cut by the Federal Reserve. At the same time, the Bank of Japan's recent rate hike strengthened the yen further, triggering a sharp unwinding of carry trades.

US Non-Farm Payrolls Jan - Aug 2024

Source: Forex Factory

Calls for an emergency 50 basis point rate cut by the Fed followed the disappointing payroll data, stoking fears of a severe recession. However, those concerns were quickly alleviated by better-than-expected data from the U.S., including the ISM Services PMI, unemployment claims, and CPI reports, which helped ease recession fears. As the markets rebounded, much of the early-month losses were recovered, with the ASX 200 ending flat, the Nikkei 225 down 1.16%, and the S&P 500 up 2.28%.

Aussies Earnings Results - What it Showed About the Economy

The Australian earnings season kicked off on July 30th with Credit Corp Group (ASX: CCP) leading the way by reporting its FY24 results. The company exceeded revenue estimates, which drove a 13.95% surge in its share price, setting a positive tone for the season.

Key highlights from the earnings season included JB Hi-Fi's stronger-than-expected performance and FY25 guidance upgrade, as well as Seek's significant drop in job advertisement volumes. Both JB Hi-Fi and Seek are closely watched as their results offer insight into broader Australian economic conditions.

Starting with JB Hi-Fi, the company reported a slight decline in sales and net profit, down 0.4% and 16.4%, respectively. Despite these seemingly underwhelming numbers, the results surpassed market expectations, pushing JB Hi-Fi’s share price to all-time highs. These results suggest that consumer spending remains active, though buyers are becoming more selective, delaying purchases to take advantage of special deals through the remainder of FY24. However, the outlook remains cautious, with consumer sentiment still low and any prospect of interest rate cuts appearing distant. To maintain momentum, JB Hi-Fi will need to continue delivering exceptional value to attract price-sensitive customers.

On the other hand, Seek faced a challenging period, with a sharp drop in job ad volumes following last year's record highs. As global economies show signs of slowing and labour costs remain elevated, companies have scaled back hiring, impacting Seek’s top line. The company anticipates this trend to persist, as firms continue to cut costs amid a more uncertain economic landscape.

Will's August market comments:

"August was marked by its share of ups and downs, as reflected in the two key topics discussed. It was also a pivotal month in reducing uncertainty around potential U.S. interest rate cuts, with growing confidence that a cut is likely in September. In contrast, Australia remains behind the curve, with rate cuts unlikely this year due to recent economic data. The size of the anticipated U.S. rate cut in September will provide a clearer indication of the challenges facing the U.S. economy."

- William Smith, Advisor, BPC Wealth Management