Global stock markets made further gains this week after weaker economic data in the United States raised the likelihood of an interest rates cut later in the summer.
Meanwhile, investors in Europe continued to assess the likely impact of recent national elections. In the UK, the new Labour government set out plans to relax restrictions on housebuilding and infrastructure development, while election results from France threatened to prolong the country’s recent period of political uncertainty. Elsewhere, renewed optimism about the potentially transformative effect of artificial intelligence pushed technology stocks to new highs, while a fall in concerns about the supply of oil saw crude values dip.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1% up for the week so far, with the S&P 500 gaining 0.3% and hitting an all-time high at Wednesday’s close given its higher concentration of technology companies. The rise in unemployment recorded at the end of last week prompted Federal Reserve chair, Jerome Powell, to state that the US economy is “no longer overheated”, while a weaker-than-expected inflation figure for June added to the hopes of an imminent rate cut. Financial markets now expect the Fed to start relaxing monetary policy in September.
UK
In the UK, the FTSE 100 closed on Thursday 0.2% up for the week so far, with the more domestically focused FTSE 250 gaining 1.9%. The large-cap index was held back by lower oil prices and a rise in the value of sterling as investors questioned whether the Bank of England would indeed cut interest rates in August as previously expected. The Bank’s chief economist warned that wages in Britain were growing faster than official data suggested, while recent figures showed the UK economy had expanded more rapidly than expected in May. Construction firms gained on hopes that the Labour government would cut red tape related to housebuilding, while shares in travel companies advanced on signs of resilient consumer spending on holidays.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.3% for the week, while France’s CAC 40 fell 0.6%. Although the failure of the far-right National Rally to win a majority in last Sunday’s French elections was seen as a positive for financial markets, the lack of a clear victory only served to increase the level of uncertainty in the country. Latest figures indicate that the recent political turmoil in the eurozone has led to a decline in investor confidence. The rate of inflation in Germany was confirmed to have fallen to 2.5% last month, and markets now expect the European Central Bank to reduce interest rates again in September and December.
Asia
In Asia, the Hang Seng index in Hong Kong gained 0.2% after recent data highlighted further weakness in consumer demand in China, with inflation falling again in June. Shares recovered towards the end of the week on the news that regulators were planning to impose curbs on short selling in the Hong Kong market. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 3.2% with technology stocks buoyed by optimism around AI. Investors in Tokyo also welcomed signs of rising inflation and the possibility that the Bank of Japan would continue to tighten monetary policy.
July 5 | July 11 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8203.9 | 8223.3 | 0.2 |
FTSE 250 | 20786.7 | 21188.9 | 1.9 |
S&P 500 | 5567.2 | 5584.5 | 0.3 |
Dow Jones | 39375.9 | 39753.8 | 1.0 |
DAX | 18475.5 | 18534.6 | 0.3 |
CAC 40 | 7675.6 | 7627.1 | -0.6 |
ACWI | 817.6 | 824.3 | 0.8 |
Hong Kong Hang Seng | 17799.6 | 17832.3 | 0.2 |
Nikkei 225 | 40912.4 | 42224.0 | 3.2 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 11 July 2024.
