Global equities remained volatile in August as the soaring cost of living continued to dominate markets. Inflation in the UK reached double digits for the first time since 1982 as the Consumer Prices Index (CPI) hit 10.1% in July. Energy, food and transport are among the biggest contributors to the rise. Meanwhile the surge in prices has led to real wages in the UK declining 3% between April and June – the biggest fall since records began in 2001.
Bond markets have also been volatile with central banks increasing interest rates in a bid to combat rising prices. UK government bonds, also known as gilts, declined more than 7% during the month as the ten year gilt yield reached its highest level since 2014. The pound meanwhile suffered its worst month against the dollar since October 2016 as it sank 4.5%.
Full round-up of August market performance
In the UK, the FTSE 100 index declined 1.06% while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, fell 6.53% and 3.96%. In the US, the S&P 500 USD index lost 4.08% while in Europe the Eurostoxx 50 EUR index dropped 5.09%. Japanese stocks measured by the Topix JPY index gained 1.21%.
Emerging markets returns were brighter, with the MSCI Emerging Markets index rising 1.25% in local currency terms. Indian stocks measured by the Nifty 50 INR index picked up 3.50% while Latin American equities, measured by the MSCI Latin America local currency index, increased 2.25%. Chinese equities measured by the MSCI China local index gathered 0.57%.
In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, declined 7.64%, with long dated (over 15 years to maturity) gilts sinking 12.01%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, were down 6.31%. In the high yield market, the Bank of America Merrill Lynch Sterling High Yield index slipped 1.04%.
There were mostly negative returns in the commodities market. The S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, ended the month down 2.68%. Crude oil futures dropped 9.20% during the month. In the agricultural markets, corn and wheat futures returned 9.33% and 0.15% in USD respectively. In the precious metals markets, the S&P GSCI Gold and Silver indices slid 2.89% and 11.89% in USD respectively.
In the currency markets, the pound depreciated 4.51% against the US dollar, 2.96% versus the euro and 0.42% against the yen.