Global stock markets this week consolidated recent gains to round off a positive month as hopes of imminent interest rate cuts grow.
Investors breathed a sigh of relief on Thursday when latest data from the United States showed a fall in personal consumer expenditures (PCE) inflation to its lowest level in almost three years. The PCE figure is seen as the Federal Reserve’s preferred measure of price rises, and this latest decline raises the likelihood of rate cuts in the first half of the year.
Falls in the price of oil should also help reduce inflationary pressures. Crude values declined this week after the US government increased its supplies to the global market, and hopes rose that a ceasefire could soon be agreed in Gaza.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.3% down for the week so far, although the S&P 500 gained 0.1% to reach another record high. There are increasing signs that the American economy is starting to feel the impact of tight monetary policy, with recent data indicating a fall in consumer confidence and durable goods orders, as well as a rise in unemployment claims. Such issues will put pressure on the Fed to reduce rates, and the market now expects the first cut to come in June.
UK
In the UK, the FTSE 100 closed on Thursday 1% up for the week so far after declining oil prices hit the share prices of London’s major energy companies. There was also weakness among construction firms after regulators announced a probe of pricing and standards in Britain’s housebuilding sector. However, latest figures showed that mortgage approvals had risen to levels not seen since Liz Truss’s disastrous mini-Budget in September 2022, while analysts predict a 10% increase in residential property sales this year.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 1.5% for the week, while France’s CAC 40 declined 0.5%. Rising consumer confidence in Germany helped the DAX to hit a record high, while news that the country’s inflation rate had fallen to 2.7% in February also lifted sentiment. A senior policymaker at the European Central Bank said that, given the current economic outlook in the eurozone, interest rate cuts were possible in the first half of 2024. In France, however, recent figures show a decline in consumer morale.
Asia
In Asia, the Hang Seng index in Hong Kong fell 1.3% after the spotlight turned to another struggling real estate giant. News of the potential liquidation of one of China’s biggest property firms has again raised fears of contagion and the possible impact on the country’s wider financial system. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 0.2% to reach a new high. Weakness in the yen in recent months has helped Japan’s multinationals generate record profits, while there are also signs that the country’s inflation rate is easing further as retail sales slow.
February 23 | February 29 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7706.3 | 7630.0 | -1.0 |
FTSE 250 | 19179.6 | 19054.9 | -0.7 |
S&P 500 | 5088.8 | 5096.3 | 0.1 |
Dow Jones | 39131.5 | 38996.4 | -0.3 |
DAX | 17419.3 | 17678.2 | 1.5 |
CAC 40 | 7966.7 | 7927.4 | -0.5 |
ACWI | 761.2 | 761.3 | 0.0 |
Hong Kong Hang Seng | 16725.9 | 16511.4 | -1.3 |
Nikkei 225 | 39098.7 | 39166.2 | 0.2 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 29 February 2024.
