Global bond yields (a measure of the price of government and corporate debt) surged during August, fuelled by concerns over inflation, high levels of government debt and colossal expenditure on AI infrastructure. The benchmark 10-year US treasury bond yield recently surpassed 5%, its highest level in almost two decades.
US inflation (as measured by CPI – Consumer Price Inflation) has remained stubbornly above the Fed’s (Federal Reserve’s) target of 2%, albeit reducing slightly from 3.5% in June to 3.4% in July and August. Persistently higher inflation was cited by the Fed as one of its reasons to increase US interest rates for the first time in more than three years in September, rising by a quarter point to a range of 3.75%-4%. The Fed highlighted strength in the jobs market and wider US economy as allowing them to focus on stabilising prices.
US equity markets continued to rise, however, with both the Dow Jones Industrial Average and the S&P500 Index hitting new closing highs during August, boosted by strong corporate earnings releases. Over August as a whole, the Dow rose by 1.3% while the Nasdaq Index climbed by 3.9%.
In the UK, CPI rose from 2.9% in July to 3.1% in August, driven by rising energy prices. As was expected, the Bank Of England chose to hold the UK base rate at 3.75% at the September meeting of its Monetary Policy Committee.
The FTSE100 Index underperformed many of its global counterparts during August, falling by 0.4% over the month. In contrast, the more domestically focused FTSE250 hit a new high during the month and rose by 4% over August as a whole.
The ECB (European Central Bank) raised its key interest rate to 2.5% in September, citing persistent inflation. Eurozone CPI jumped from 2.9% in July to 3.4% in August, its highest level in three years.
Closer to home, a long period of jobs growth in the Northern Ireland economy may have ended. Figures from HMRC showed that the number of people on company payrolls stalled at 819,000 between April and August, with the unemployment rate increasing slightly to 2.4%. Total hours worked across the economy were also down slightly in the three months to July, suggesting employers may be trying to reduce costs by cutting back on overtime.
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