Three Things That Moved the Market 📈

The markets got no chill! After a 9% rally in July, the markets rose by another 3% in August. Unlike before though, there has been some good news print this time around.

It’s not only India really, but even the US markets have posted gains for straight four weeks now. In fact, this has been the longest streak for the markets since October.

What’s so good then?

1. Inflation in the US

The Consumer Price Index rose 8.5% in July from a year ago. The increase was lower than consensus estimates. Moreover, it was much lower than June 2022’s inflation of 9.1%. This marked the first sign of inflation cooling in months. Core CPI, which excludes food and energy, rose 5.9% annually - this too lower than estimates.

2. Inflation in India

CPI in India eased to 6.7% in July on an annual basis, from 7% in June. The easing of inflation came from a drop in prices for food and oil. However, the number remained over RBI’s comfort zone of 2-6%. It’s remained above comfort zone for the seventh consecutive month now.

3. Industrial output in India

Manufacturing sector output, which accounts for more than three quarters of the IIP (Index of Industrial Production) rose 12.5% in June. The double digit growth shows recovery in India’s industrial output despite global weakness.

But, while the world got happy on inflation data from the US, the job market is still not leaving room for a genuine sigh of relief. The US added 528,000 jobs last month, and the unemployment rate fell to a five decade low of 3.5%. More jobs in tough economic conditions - sounds like a good thing, no?

Not economically. More jobs, and a tight labour market imply higher wage inflation, which fuels more inflation in turn. The Fed will probably need to keep the aggression on and keep the rate hikes coming to cool the economy down. And that brings us back to the same problems as earlier!