Europa

European markets fell in August, led by Ireland and Greece, as worries about a global 'double-dip' recession mounted and concerns over sovereign debt returned. Shares in Dublin tumbled by some margin, making Ireland the weakest performer among the world's developed markets after Standard & Poor's cut its rating of the country's debt by another notch. This reflected concerns about the country's banks, particularly Anglo-Irish Bank, which lost €8bn in the first six months of this year and remains dependent on state support. A profit warning from Irish building materials group CRH, which sent its shares down to their lowest level since 2003, also weighed on investor sentiment. Elsewhere, Spanish unemployment rose to 20.3%, the highest figure seen in a eurozone country since the adoption of the single currency. This prompted Prime Minister Zapatero to suggest he might reverse some of the cuts in infrastructure spending announced earlier this year. The struggles of Ireland, Greece and Spain were in stark contrast to the relative success of Germany, where exports are booming helped by the weak euro. German luxury car producer BMW reported its biggest profit in more than two years in August. BMW's sales in China have doubled this year. Other German companies are asking employees to work longer hours to help meet higher demand and German unemployment has shrunk to almost pre-crisis levels. For the eurozone as a whole, second quarter GDP data was a stronger-than-expected 1.0%. This was largely down to German GDP quarter-on-quarter growth of 2.2%, the strongest quarterly reading since re-unification.

Verenigde Staten

Poor economic news overshadowed positive news on corporate earnings in August. As fears mounted that signs of slowing growth might be a prelude to a double-dip recession, the Dow Jones Industrial Average suffered its first negative August for five years. The first blow to sentiment was dealt by poor news on employment; the US economy added just 12,000 new jobs in July. The second came from very weak data on the housing market. Sales of new homes plunged to a record low while sales of existing homes fell to their lowest level in over a decade as a tax credit for homebuyers expired. Some of the difficulties facing America's consumer-facing companies were illustrated by a fall in like-for-like sales at Burger King. Its customer base is shrinking as unemployment benefits expire and new jobs fail to materialise. Kraft and Pepsi also reported weak sales, blaming a fall in confidence among low-income consumers. Meanwhile, discount retailer Wal-Mart, reported a fall in same-store sales for a fifth consecutive quarter. There was, however, some good news in August, particularly a burst of M&A activity, which provided a welcome distraction from America's lingering economic malaise. A high-profile battle for 3Par, a data-storage company, saw Hewlett-Packard taking on arch rival Dell. While HP beat Dell's initial bid, the market expects Dell to respond with an improved offer. Chip-maker Intel, meanwhile, reached an agreement to buy McAfee, which makes anti-virus software, for more than $7bn.

Japan

August was another poor month for investors in Japan. By the end, the Nikkei 225 Index had dipped below the key 9,000 support level, putting it firmly in bear-market territory. While Japanese shares look cheap on most conventional measures, the appreciation of the yen threatens the competitive position of Japan's exporters, who play a dominant role in the country's economy and stockmarket. The yen benefited in August from renewed worries about a double-dip recession in the US. The seriousness with which Japan's business leaders view the yen's strength was made clear by comments from senior car executives. Honda's chief financial officer complained that its Japanese-built vehicles are not economically feasible at an exchange rate of 85 yen or less to the dollar. Nissan announced it would transfer some of its production to Korea to protect itself from the rising yen, and Panasonic revealed its intention to move part of its plasma display production to Shanghai. In response to growing pressure, the Bank of Japan expanded a bank-loan programme by ten trillion yen, and Prime Minister Kan announced a ¥920bn stimulus package. Investors, however, were unimpressed - as the month drew to a close, the Nikkei continued to fall.

Azië Pacific

In local currency terms, developed Asian markets fell in August - but not as far as those in the West. Investors were concerned that a double-dip recession in the US could potentially slow growth in China and the rest of Asia. Still the month's data showed that economic growth across Asia generally remained robust; Singapore's economy grew at a blistering 17.9% pace in the second quarter of this year. The city-state's government cut the number of people who can borrow to buy second properties from 80% to 70% in an attempt to discourage speculation and cool its runaway residential property market. It also increased the stamp duty levied when a second home is sold within three years of its purchase. The Reserve Bank of Australia held interest rates at 4.5% in August, but retail sales were surprisingly strong, suggesting that consumer demand was not nearly as subdued as had been feared. The main point of interest, however, was the country's general election, which resulted in a hung parliament. In Hong Kong, Li & Fung's HK$7bn bid for Integrated Distribution Services Group, which would give the distribution company a network in mainland China, was the latest example of corporate activity in the territory.

Verenigd Koninkrijk

Share prices in the UK fell in August, in common with most developed markets, as investors focused on the possibility that a slowdown in the US might weigh on the global economy. Those worries were exacerbated after the Bank of England (BoE) lowered its forecast for UK economic growth. In a gloomy long-term forecast, the BoE noted that tight credit conditions and the prospect of large spending cuts by the coalition government would dampen growth. There were, however, some positive surprises on the economy. Retail sales, business confidence and mortgage lending all beat expectations. Retail sales rose by 1.1%, the strongest pace seen since February. There was also some good news on the corporate front. Prudential Insurance reported that operating profits in the first six months of the year rose by an impressive 41%. A surge in M&A activity was another positive development for the market. Anglo-Australian miner BHP Billiton reported a doubling in first-half profits and launched a hostile takeover bid for PotashCorp, a Canadian fertiliser company. BHP Billiton anticipates that that the adoption of Western-style diets by Chinese consumers will lead to increased demand for fertiliser and thus boost potash prices. HSBC also announced its intention to buy a controlling stake in Nedbank, South Africa's fourth-largest lender, in order to bolster its presence in Africa.

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