Global stock markets had a largely positive week despite the latest indications that central bank interest rate cuts remain some way off.
Investors have chosen to focus instead on upbeat economic data and company earnings statements for the final quarter of 2023 that overall have exceeded expectations.
The week began on a lacklustre note after Federal Reserve Chair, Jerome Powell, told reporters that the Fed would take a “prudent” approach to monetary policy for the foreseeable future. His sentiments were echoed by the Organisation for Economic Cooperation and Development (OECD), which warned that central banks should ensure inflation was fully under control before thinking about cutting rates. However, positive data from the US economy and strong trading reports from major technology firms around the world helped boost market sentiment as the week progressed.
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.2% up for the week so far. Meanwhile, the S&P 500 gained 0.8% to reach a record high and come within a whisker of breaching the 5,000-point mark. The S&P’s recent gains have been based mainly on the success of the technology giants, and this week was no exception. Recent statistics demonstrated continued resilience in the US services sector and the country’s labour market, with initial unemployment claims showing a surprising fall. However, signs of a further easing of price pressures helped calm fears that the Fed could keep rates at their current high level for longer than expected.
In the UK, the FTSE 100 closed on Thursday 0.3% down for the week so far after a senior Bank of England official warned of the risks facing the economy. Britain’s lack of major technology companies meant the London market missed out on much of the sector’s advances, while a downbeat earnings report from a major pharmaceutical company also hit sentiment later in the week. Latest figures showed continued weakness in consumer spending and a rise in missed mortgage repayments. However, confidence in the construction sector rose as data showed another monthly rise in property prices.
In Frankfurt, the DAX index ended Thursday’s session up 0.3% for the week, while France’s CAC 40 gained 1%. Shares in Europe benefited from strong company earnings reports and news that Chinese authorities were planning further stimulus measures. Meanwhile, sub-par economic data from the eurozone make an early European Central Bank interest rate cut increasingly likely. Recent statistics suggested Germany’s services sector had contracted again in January, while growth in the country’s construction and manufacturing sectors also remains sluggish.
In Asia, the Hang Seng index in Hong Kong gained 2.2% following news on Tuesday that China’s premier, Xi Jinping, was considering measures aimed at shoring up the country’s stock markets following recent heavy losses. A day later it was reported that the government had sacked the head of China’s securities regulator. In economic news, however, the consumer prices index fell at its fastest rate in 15 years last month. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 2% due to gains in technology stocks and further signs that the Bank of Japan has little intention of tightening monetary policy soon.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 8 February 2024.