Global stock markets endured a difficult week after investors’ hopes of imminent cuts to interest rates in the United States and Europe were dampened by unexpectedly strong economic data.
Concerns about the escalation of geopolitical tensions in the Middle East following the death of Iran’s president in a helicopter crash also created uncertainty at the start of the week, pushing the price of gold and oil back towards recent highs.
A strong quarterly earnings report from one of the world’s biggest semiconductor companies helped lift technology stocks on Wednesday and Thursday, but pessimism around further delays to central banks’ loosening of monetary policy was once again the dominant theme.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday down 2.3% for the week so far, with the S&P 500 falling 0.7%. The Dow’s 600-point fall on Thursday represented its worst single-day performance of the year. It was sparked by recent data showing a surprisingly large decline in unemployment claims in the US alongside increasing price pressures among American manufacturers. Both pieces of news will add to the Federal Reserve’s view that inflation has not yet been brought under control, making it considerably less likely that interest rates will be cut over the summer.
UK
In the UK, the FTSE 100 closed on Thursday 1% down for the week so far. The index was boosted on Monday by rising oil and metal prices, but as fears over the situation in the Middle East eased, so too did commodity values. The International Monetary Fund said it was increasingly likely the British economy would be able to achieve a soft landing this year and upgraded its growth forecasts. Wednesday’s inflation data showed the consumer prices index had fallen to 2.3% – although analysts had expected a steeper decline – and UK markets reacted calmly to Prime Minister Rishi Sunak’s unexpected announcement of a general election on 4 July.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 0.1% for the week, while France’s CAC 40 fell 0.8%. European investors faced a similar situation to those in the US, with stronger private sector data published towards the end of the week appearing to reduce the probability that the European Central Bank will cut rates at its June meeting. However, there were encouraging signs that price pressures on German factories have started to ease.
Asia
In Asia, the Hang Seng index in Hong Kong dropped 3.5% as its highly volatile year continued. Chinese stocks gave up some of their recent gains as investors waited for further signs that the country’s economic recovery is gathering steam. Shares in one of the country’s biggest technology conglomerates fell sharply on speculation it is about to issue a convertible bond that will lead to some degree of equity dilution. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 0.8% after recent figures showed a welcome expansion of output in May. Japan’s technology sector was also boosted by positive corporate news from a major American peer.
May 17 | May 23 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8420.3 | 8339.2 | -1.0 |
FTSE 250 | 20749.9 | 20631.3 | -0.6 |
S&P 500 | 5303.3 | 5267.8 | -0.7 |
Dow Jones | 40003.6 | 39065.3 | -2.3 |
DAX | 18704.4 | 18686.6 | -0.1 |
CAC 40 | 8167.5 | 8102.3 | -0.8 |
ACWI | 795.0 | 789.0 | -0.8 |
Hong Kong Hang Seng | 19553.6 | 18868.7 | -3.5 |
Nikkei 225 | 38787.4 | 39103.2 | 0.8 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 23 May 2024.
