Global stock markets have enjoyed another largely positive week despite concerns that sticky inflation could lead to delays in interest rate cuts.
Investors have again reacted in relaxed fashion to mixed economic data, while the latest batch of corporate earnings reports from the high-flying US technology sector have provided a fresh source of optimism.
Major indices shrugged off signs that the rate of price rises in the US remains well above the Federal Reserve’s 2% target. The news is thought to have made it considerably less likely that the Fed will cut rates at its June meeting, as had previously been expected. However, if this week’s rise in oil prices continues, there is a risk markets could become more jittery. Crude values increased sharply after it was reported that Ukraine forces were planning to attack Russian refineries, while oil reserves in the US have fallen more than forecast and the International Energy Agency has warned of production shortfalls in the months ahead.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.5% up for the week so far, with the S&P 500 matching this rise. US stocks made significant gains on Tuesday after a major software company announced quarterly results well ahead of expectations. These advances came despite consumer price index figures which showed annual inflation had risen to 3.2% in February, contrary to analysts’ predictions. This was followed up by Thursday’s surprise uptick in producer price inflation, which led US markets to give up some but not all of their earlier gains.
UK
In the UK, the FTSE 100 closed on Thursday 1.1% up for the week so far as rising oil prices bolstered the index’s energy stocks. Miners also benefited from signs that demand could be on the verge of recovery in China, while investors in Britain welcomed the news that the domestic economy expanded by 0.2% in January. Analysts now expect the technical recession of late 2023 to be short lived thanks to signs of a recovery in retail spending. News of further weakness in the UK employment market, meanwhile, provides the Bank of England with further justification for interest rate cuts in the coming months.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.7% for the week, while France’s CAC 40 gained 1.7% as the recent strong run of European stocks continued. Both indices hit new highs this week as inflation was confirmed to have fallen to 2.7% in Germany in February. Meanwhile, industrial production levels across the eurozone also dropped faster than expected last month. As appears to be the case in the UK, this puts greater pressure on central bankers to cut rates sooner rather than later.
Asia
In Asia, the Hang Seng index in Hong Kong gained 3.7% during a rare positive week. Figures published last weekend showed at least a temporary pause in deflation in China, with prices rising 0.7% in February. Investors are hopeful this represents the start of a sustained return to growth. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 2.2% as speculation grew that the Bank of Japan could end its policy of negative interest rates when it meets next week.
March 8 | March 14 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7659.7 | 7743.2 | 1.1 |
FTSE 250 | 19601.8 | 19486.0 | -0.6 |
S&P 500 | 5123.7 | 5150.5 | 0.5 |
Dow Jones | 38722.7 | 38905.7 | 0.5 |
DAX | 17814.5 | 17942.0 | 0.7 |
CAC 40 | 8028.0 | 8161.4 | 1.7 |
ACWI | 771.3 | 772.7 | 0.2 |
Hong Kong Hang Seng | 16353.4 | 16961.7 | 3.7 |
Nikkei 225 | 39688.9 | 38807.4 | -2.2 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 14 March 2024.
