August 2015

• Global markets suffered a sharp correction in August 2015 as concerns over China's economic slowdown and an unexpected currency devaluation triggered widespread risk aversion.
• Equity markets around the world experienced significant volatility, with emerging markets and commodity-related sectors among the hardest hit.
• The United States recorded its largest market swings in several years as investors reassessed global growth prospects and the timing of Federal Reserve interest rate increases.
• European and Japanese markets declined in sympathy with global equities despite continued support from accommodative central bank policies.
• Commodity prices weakened further, reflecting fears of slower Chinese demand and persistent supply imbalances.
• Government bond yields fell as investors sought safe-haven assets amid heightened uncertainty.

Asia (ex. Japan)

Asian markets outside Japan were at the centre of global market turbulence in August. Chinese authorities surprised investors by devaluing the renminbi, raising concerns that economic conditions were weaker than previously believed. The move intensified fears about slowing industrial activity, weaker trade and reduced demand for commodities, contributing to steep losses in regional equities.

Markets across South Korea, Taiwan, Hong Kong and Southeast Asia declined sharply as investors reacted to heightened uncertainty and significant capital outflows. India proved relatively more resilient due to stronger domestic fundamentals, although broader risk aversion weighed on sentiment throughout the region.

Europe

European equities fell substantially during August as concerns over China and the global growth outlook overshadowed the benefits of the European Central Bank's quantitative easing programme. Export-oriented sectors and commodity producers were particularly weak, reflecting fears of reduced demand from Asia.

Despite the equity sell-off, eurozone government bond markets remained relatively stable as investors anticipated that the ECB would maintain accommodative policy. Economic data in Europe continued to show modest improvement, but global uncertainty and increased volatility dominated investor sentiment.

United States

U.S. equities experienced one of their most volatile months since the global financial crisis. Major indices fell sharply, and intraday price swings increased dramatically as investors reacted to China's slowdown, collapsing commodity prices and uncertainty over whether the Federal Reserve would raise interest rates in September.

Although economic fundamentals in the United States remained broadly healthy, market sentiment deteriorated significantly during the month. Treasury yields declined as investors sought safety, and expectations for near-term policy tightening were reduced as the Federal Reserve acknowledged heightened international risks.

United Kingdom

UK equities declined in August, led lower by mining and energy companies that were particularly exposed to falling commodity prices and concerns over Chinese demand. Domestic economic conditions remained supportive, but international developments dominated market performance.

The Bank of England maintained interest rates unchanged, and inflation remained subdued. Sterling weakened modestly as investors reassessed the outlook for monetary tightening. Gilt yields declined in line with other major sovereign bond markets as safe-haven demand increased.

Japan

Japanese equities fell sharply during August as global risk aversion and concerns over China outweighed the benefits of ongoing monetary stimulus. Exporters were pressured by worries about weaker Asian demand, while volatility increased significantly across financial markets.

The Bank of Japan maintained its accommodative stance and signalled readiness to act if economic conditions deteriorated further. The yen strengthened during periods of market stress, temporarily reducing one of the key supports for corporate earnings.

Emerging Markets

Emerging markets experienced substantial losses in August as China's slowdown, falling commodity prices and a stronger U.S. dollar combined to intensify investor concerns. Commodity-exporting countries such as Brazil, Russia and South Africa were particularly hard hit.

Capital outflows accelerated and several emerging market currencies weakened sharply. Countries with stronger domestic demand and lower inflation, including India, held up better than their peers but were not immune to the broader sell-off in risk assets.

Commodities

Commodity prices remained under severe pressure during August. Crude oil fell to fresh multi-year lows as oversupply persisted and concerns over weaker Chinese demand intensified. Energy markets were further affected by expectations of rising production from major exporters.

Industrial metals such as copper and aluminium declined sharply, reflecting fears of reduced manufacturing activity in China. Gold initially benefited from safe-haven demand but later weakened as the U.S. dollar stabilised and investors reduced exposure across asset classes.