Key facts

Trade frictions: Tensions escalated again between US and China amid trade relationship. After a 10% tariff hike announcement, China retaliated with new tariffs on $75 billion worth of US goods in addition to restarting levies on American autos. Chinese currency fell below 7 against the dollar pushing Trump to call for a currency manipulation by Chinese authorities.
Brexit: UK PM Johnson announced he wanted to suspend the parliament for few weeks from September 9 until October 14 to prevent a parliament attempt to vote against a No deal Brexit. This move created a havoc among MPs and British people who are now fighting to avoid a shutdown that can lead to a general election.
Argentina: Poll results showed a loss at the upcoming presidential elections in October for incumbent president Macri. The local stock market saw a massive sell-off with a 30% drop and the peso closed 15% weaker against the dollar. S&P rating downgraded the sovereign debt rating to selective default as the country postponed $7 billion of payments on short term local notes held by institutional investors.
G7 meeting: The gathering has been a catalyst to ease spirits as Trump decided to put on hold its tax on French products in retaliation to GAFA tax. This meeting has also seen a Trump move in favor of Russia who handed a potential invitation to Russian to the next summit. France’s move on the Iranian file could also underline the willingness for the international community to bring back Iran and the US at the discussion table

Market commentary

11 trading sessions with moves of more than 1% out of 22 for the S&P 500, with 3 declines of at least 2.6% is clearly the sign that August has been a volatile month as expected. S&P 500 recovered from these spectacular moves and posted a -1.8% performance. Volatility was mainly driven by US China trade escalations and recession signs such as curve inversion that occurred many times spurred investors to find shelter in haven assets such as bonds, gold and Yen. Consumer staples was one of the best performing sector and companies such as Dollar General, Target did well while Oil & Gas was the laggard sector among S&P 500. The Japanese Yen was the best performing currency among G10 increasing by 2.35% against the greenback while Gold reached $1,540 an ounce before retreating to $1,529 at the end of the month. Multiple rate cuts implemented by the Reserve Bank of New Zealand sent the currency down by 3.52% against the dollar in August. This drop also underlined the difficulty the country is facing with a slowdown of China, its biggest export partner.


Disappointing manufacturing data is undermining business confidence all over the world. Moreover, with political issues in Europe with Italy, Brexit and in China with Hong Kong, we are slowly drifting to a more complex situation. Recently, China filed case at WTO over US tariffs. While this move could be useless, it may allow China to buy time for trade negotiations. The Brexit situation is also concerning because in case a No deal path is approved, Scotland and Irish representatives could seek a European rapprochement. Emerging markets debt and equities could begin to suffer from trade woes as credit spreads in corporate High and aggregate yields are beginning to widen while short term sovereign interest rates continue to edge lower. While investors expect a cut of 10 to 20 bps in ECB deposit rate at September 12 meeting and another 25 bps cut in Fed funds rate, we think those moves are not mandatory due to consumer spending that remains strong. Unemployment is also decreasing in Europe and it is already at lowest levels in the US partly due to labor shortage thanks to Trump’s immigration policy. Oil price can also fluctuate this month with a likely increase in inventories since Nigeria and Saudi Arabia increased their production while China put tariffs on Oil US imports. With Hurricane Dorian and household consumption, consumer staples sector could continue to thrive in the short term even in a risk off market.