August was a mixed month for global risk assets. Developed market equities were mixed, with large cap and growth outperformance in the US, emerging market equities were mostly higher, the USD was unchanged, commodities were mixed, and credit spreads widened. Minutes from the July Fed meeting showed a split amongst officials regarding the timing of the next interest rate increase due to persistently low inflation, though there appeared to be consensus for a September start to a reduction in the Fed’s balance sheet. The annual Jackson Hole central banker meeting produced little insight into the monetary plans of the major central banks. The US job report showed that 209,000 non-farm jobs were added in July, the unemployment rate ticked lower to 4.3%, and the labor force participation rate rose slightly to 62.9%.
Notable corporate transactions announced in August included the $1.6 billion sale of sPower by Fir Tree to AES and AIMCo, KKR’s $1.4 billion acquisition of PharMerica Corp., the $3.3 billion purchase of CH2M Hill Cos by Jacobs Engineering, the $1.2 billion sale of the communities and sports division of Active Network to Global Payments, DigiCert’s $950 million acquisition of Symantec’s website security business, the acquisition of Tronox’s alkali business by Genesis Energy for $1.3 billion, the $2.4 billion purchase of American Medical Response by American Medical Group, the $11 billion merger of Invitation Homes and Starwood Waypoint, the $1 billion purchase of Transplace by TPG Capital, Transocean’s $3.4 billion acquisition of Songa Offshore, the $1.5 billion acquisition of DuPage Medical Group by Ares Management, the $325 million sale of Prudential’s US broker dealer network to LPL Financial, the $5.6 billion acquisition of Calpine by Energy Capital Partners, the $4.95 billion purchase of Maersk Oil by Total, the $9.45 billion acquisition of Oncor by Sempra Energy, Cisco’s $320 million purchase of Springpath, Japan Tobacco’s $936 million purchase of Mighty, the $2.6 billion acquisition of CRH’s US distribution arm by Beacon Roofing, the purchase of Kite Pharma by Gilead Sciences for $11 billion, Leonard Green’s $3.1 billion purchase of CPA Global, and the $1.55 billion acquisition of Advisory Board’s education business by Vista Energy.
Developed market equities were mixed in August (see page 8), with the largest gains in Hong Kong (+1.9%), the UK (+1.5%), and Italy (+1%); the worst performing were Spain (-2%), Germany (-0.6%), and Japan (-0.4%). US small caps underperformed large caps, with the Russell 2000 down 1.3% and the Russell 1000 up 0.3% (see page 3). IT (+3.5%), Utilities (+3.3%), and Health Care (+1.8%) were the best performing sectors in August, while Energy (-5.2%), Telecom (-3%), and Consumer Discretionary (-1.8%) were the worst performing (see page 2). Large cap value (-1.2%) underperformed large cap growth (+1.8%) in August (see page 3). Emerging market equities were mostly higher in August (see page 9), with the biggest gains in Argentina (+11.1%), Brazil (+7%), and Russia (+5%); Korea (-1.7%), India (-1.1%), and the Philippines (-1%) were the worst performing.
In currencies, the USD Index was down 0.2% in August (see page 10). The strongest developed market currencies against the USD were the Swedish Krona (+1.6%), Norwegian Krone (+1.3%), and Swiss Franc (+0.9%); the worst performing were the New Zealand Dollar (-4.4%), British Pound (-2.2%), and Australian Dollar (-0.7%). Emerging market currencies were mostly stronger against the USD, with the biggest gains in the Russian Ruble (+3%), Chinese Yuan (+2%), and Turkish Lira (+1.9%) and losses in the Brazilian Real (-0.7%), Korean Won (-0.5%), and Mexican Peso (-0.5%).
The US Treasury yield curve shifted lower in August (see page 12). 10 year rates closed the month at 2.12%, down from 2.29% at July month end. Investment grade and high yield credit spreads widened in August (see page 13).
In commodities, the GSCI index was down 0.8% in August (see page 11), with gains in Industrial Metals (+8.6%), Precious Metals (+4%), and losses in Agriculture (-7.4%), Livestock (-5.4%), and Energy (-0.3%). Within individual commodities, Gasoline (+12.7%), Aluminum (+10.4%), and Natural Gas (+7.6%) saw the biggest gains, while Wheat (-13.6%), Coffee (-9.3%), and Corn (-7%) saw the biggest losses. Gold was up 3.9% for the month.
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