Global stock markets managed to recover some of their early-week losses on Thursday following signs that the United States Congress was likely to approve a rise in the government debt ceiling after weeks of increasingly fraught negotiations
Worries that the House of Representatives could block the agreement struck between President Biden and House speaker Kevin McCarthy last weekend added to volatility on Monday and Tuesday, before nerves were calmed by the House’s green light on Wednesday. While the deal still requires ratification by the Senate, this is thought to be more of a formality. Elsewhere, mixed economic news in America and China added to concerns about global growth, although there were encouraging indications from Europe that inflation was starting to slow.
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.1% down for the week so far, with the S&P 500 gaining 0.4%. As well as an apparent resolution to the debt ceiling standoff, investors in the US welcomed ongoing strength in technology stocks – particularly those with some form of exposure to artificial intelligence. Signs towards the end of the week that wage inflation was beginning to ease also raised hopes that the Federal Reserve would pause its recent run of interest-rate hikes in June and possibly July.
In the UK, the FTSE 100 closed on Thursday down 1.8% up for the week so far, with weakness in commodities and oil companies weighing on the index as concerns about a global slowdown intensified. Problems in Britain’s property sector continued with new data showing a slump in home sales and a sharp decline in mortgage lending on the back of recent interest-rate rises. UK factory output, meanwhile, has reportedly been held back by the post-Brexit checks introduced in recent months.
In Frankfurt, the DAX index ended Thursday’s session down 0.8% for the week, while France’s CAC 40 fell 2.5%. Losses were particularly acute earlier this week on concerns about the US debt crisis as well as slowing growth in China – a major trading partner for German and French firms alike. However, spirits were lifted by eurozone inflation data published on Thursday which showed the rate of price rises in the bloc had fallen to its lowest level since the Russian invasion of Ukraine in February last year.
In Asia, the Hang Seng index in Hong Kong dipped 2.8%, extending its recent losses as fresh data suggested China was struggling to maintain its post-Covid recovery. Official figures indicated that the country’s service sector had contracted for a fourth consecutive month while factory output fell unexpectedly in May. Japan’s Nikkei 225 index of leading shares advanced 0.7%, having hit its highest level since 1990 on Monday. A rise in retail sales and a healthy outlook for Japanese government finances underpinned the latest gains.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 1 June 2023.