Global stock markets surged ahead this week as the prospect of an interest rate cut in the United States grows ever closer, while concerns about political uncertainty in Europe eased following the first round of voting in France’s snap national election
Investors seized on comments from US Federal Reserve chair, Jerome Powell, that “significant progress” had been made in the battle against inflation. Weaker data from the American economy also increased the pressure on the Fed to release the handbrake of tight monetary policy and added to the sense of optimism. In the UK, an expected landslide general election victory by the opposition Labour party was forecast to be a positive for business confidence and the wider stock market.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Wednesday, ahead of the 4 July Independence Day holiday, 0.5% up for the week so far, with the S&P 500 gaining 1.4% to reach an all-time closing high. Signs of further weakness in the manufacturing sector, as well as indications that labour markets may finally be cooling down, could spur the Fed to reduce rates at the end of this month – but analysts believe a cut in September is more likely. Investors await the monthly non-farm payroll data, due to be published on Friday, for further guidance.
UK
In the UK, the FTSE 100 closed on Thursday 0.9% up for the week so far—thanks to positive economic data and hopes of a period of political stability in the wake of the general election. There were further signs of recovery in both the manufacturing and construction sectors, while carmakers reported that sales of new vehicles had rebounded to pre-pandemic levels. Large-cap energy firms in London also benefited from a rise in the price of oil, with crude values up in response to concerns about potential supply disruptions in the US due to extreme weather conditions in the Gulf of Mexico.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 1.2% for the week, while France’s CAC 40 gained 2.9%. The rally in European stocks was largely due to indications from last Sunday’s first round of voting in France that Marine Le Pen’s far-right National Rally party would be unlikely to command a majority in the French parliament. The prospect of a deadlocked legislature is thought to reduce the chances of significant disruption to financial markets. Although consumer inflation in the eurozone fell slightly to 2.5% in June, the European Central Bank appears unlikely to reduce interest rates again until September at the earliest.
Asia
In Asia, the Hang Seng index in Hong Kong gained 1.7% after improved manufacturing data provided more evidence of China’s economic recovery. Investors also welcomed signs that officials in the European Union may be willing to rethink their plans to impose tariffs on imports of Chinese-made electric vehicles. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 3.4% to reach another record high. Further weakness in the yen drove inflows, with particularly strong gains in motor manufacturers, banks and technology stocks.
June 28 | July 4 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8164.1 | 8241.3 | 0.9 |
FTSE 250 | 20286.0 | 20610.3 | 1.6 |
S&P 500 | 5460.5 | 5537.0 | 1.4 |
Dow Jones | 39118.9 | 39308.0 | 0.5 |
DAX | 18235.5 | 18450.5 | 1.2 |
CAC 40 | 7479.4 | 7695.8 | 2.9 |
ACWI | 802.0 | 815.2 | 1.6 |
Hong Kong Hang Seng | 17718.6 | 18028.3 | 1.7 |
Nikkei 225 | 39583.1 | 40913.7 | 3.4 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 4 July 2024.
