After a volatile trading session on Tuesday, the Dow Jones Industrial Average ended the month 4.3pc lower, while the S&P 500 was down 4.7pc. The weak performance of equity markets was mirrored across the world’s major financial centres, with the FTSE 100 losing 0.6pc in the month, Tokyo’s Nikkei 225 7.5pc and Germany’s Dax 5.8pc.
The flight from equities saw some of the safest investments enjoy sharp rallies. UK government bonds had their strongest month in almost two years and gold prices experienced their best run since April. Oil, meanwhile, fell the most since May on signs the global economy is faltering.
“It’s pretty clear the US economy has hit a wall,” said Barry Knapp, head of US equity strategy at Barclays Capital. “The macro picture is dominating and, right now, it’s not clear what’s going to get the market out of this spot.”
Those fears took centre stage again during the final day of trading.
In New York, markets enjoyed some brief respite from the blizzard of weak data as reports on the US housing market and consumer confidence proved better than feared. The Conference Board’s index of consumer confidence climbed to 53.5 last month from 51 in July, while the latest reading from the respected S&P/Case-Shiller index showed that home prices were up 4.2pc in June compared with a year ago.
The day’s rally proved short-lived, however, after the minutes of the Federal Reserve’s latest meeting returned investors to the summer’s familiar themes. Fed chairman Ben Bernanke has spent the past few weeks facing increasing pressure from markets to publicly declare he will do more to fight the prospect of a second recession if the recovery stumbles further. According to the minutes, some members of the Fed’s Open Market Committee saw “increased downside risks to the outlook for both growth and inflation”.
That admission left the Dow up just 4.99 points at 10,014.72 for the day, while the S&P ended the day up 0.41 at 1,049.33.
John Brady, a senior vice-president at MF Global, said that the minutes showed “very little change from last Friday’s Bernanke speech, but if anything there are hints that the Fed is leaning toward lowering its growth forecast for 2011”.
Britain’s FTSE 100, which was down around 1pc for most of morning, closed up 0.45pc at 5225. Germany’s DAX gained 0.2pc and CAC 40 in France, which was down 1pc before lunch, ended up 0.1pc.
But it was Tokyo that endured the toughest final day, with the Nikkei 225 slumping 3.6pc to 8,824.06. Investors are concerned that the Bank of Japan’s efforts to weaken the runaway strength of the yen may not be enough to protect the profits of the country’s big exporters – Telegraph