Source: Wall Street See

A series of strong economic data has dispelled the gloom of the U.S. recession, and many global stock markets have achieved their biggest weekly gains since November last year.

In the United States,$S&P 500 Index (.SPX.US)$Breaking a four-week losing streak, the cumulative increase this week was 3.9%, the strongest performance since November last year. Friday's trend was relatively stable, but U.S. stocks still maintained their upward momentum over the past few days. Currently, the S&P 500 is only 2% below the historic high set in July.

The Nikkei, which had a bloody start in August, surged 3% on Friday and rose 7.9% this week, while the STOXX 600 index in Europe rose 2.4% for the week. The MSCI Global Developed Markets Stock Index also had its best weekly performance since early November last year.

"Many fears and anxieties have been dispelled," said Joe Mazzola, chief trading and derivative strategist at Charles Schwab, "data shows that the U.S. economy is slowing down, but (recession) is only expected two years after the rate hike, (the economy has not really entered a recession). People are just nervous about significant economic slowdowns."

Economic data stronger than expected, recession panic fades

The market's recovery this week is mainly driven by economic data:

The year-on-year CPI growth rate for July, announced on Wednesday, fell below 3% for the first time since 2021 and within the official target range set by the Fed.

On Thursday, the month-on-month growth rate of U.S. retail sales in July unexpectedly hit a record high in a year and a half. The number of first-time unemployment claims in the week of August 10 was lower than expected, boosting investor confidence.

On Friday, the consumer confidence index also exceeded expectations, slightly higher than the eight-month low set in July. The volatility index VIX, known as Wall Street's "fear index", fell below 15, after hitting a four-year high of 65 in early August during a global sell-off wave.

"Currently, the market is definitely in a subconscious reaction mode to upcoming data," said Liz Ann Sonders, chief investment strategist at Charles Schwab.

"The trend over the past few weeks suggests that market movements may fluctuate based on individual data points, and we may see more volatility in the future," said Li Wei, chief investment strategist at BlackRock Global.

Federal funds futures on Friday showed that investors have fully digested expectations of three rate cuts by the end of the year, and believe that the likelihood of four rate cuts within the year is high.

Less than two weeks ago, the U.S. non-farm unemployment rate sparked a recession panic, causing waves in global stock markets and leading investors to bet on a 50 basis point rate cut by the Fed in September.

The 2-year U.S. Treasury bond yield, closely related to interest rate expectations, closed on Friday at 4.05%, up 0.39 percentage points from its low on August 5.

"This week was basically a 'one-way' week, with pessimistic prospects severely disrupted," said Florian Ielpo of Lombard Odier Investment Managers. "However, economic data is still full of contradictions. Significant uncertainties still exist, so caution must be exercised to avoid being too optimistic."

Next week, investors will closely monitor the annual global central bank meeting, and Wall Street generally believes that Powell's speech will pave the way for a rate cut in September.

"We expect Fed Chairman Jay Powell to more clearly suggest a rate cut in September and to provide a broader background for the Fed's expectations for future rate cuts," said Ian Lyngen, chief strategist for U.S. rate strategy at BMO Capital Markets.

"We expect Powell to suggest that given recent progress, the Fed may cut interest rates in September, but will not be completely certain about the magnitude of the cut. We expect the cut to be 25 basis points."

Editor / jayden