Global stock markets made solid gains this week as the likelihood of imminent interest rate cuts increased while geopolitical tensions eased.
Improving economic data from China has also helped boost sentiment. The rally that began at the end of last week after employment data in the United States came in weaker than expected continued into Monday and Tuesday. Investors believe the resilience of the American jobs market has been one of the main obstacles to the Federal Reserve cutting interest rates this year. As such, a slowdown in hiring and wage growth could prove to be a positive development for stock markets if it leads to a relaxation of monetary policy. The US government, meanwhile, has put increasing pressure on Israel to agree to a ceasefire with Hamas, and the prospect of a de-escalation of hostilities in the Middle East saw oil prices ease back this week.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.8% up for the week so far, with the S&P 500 gaining 1.7% to move back towards the highs recorded at the end of March. Rate cut hopes dominated sentiment, and a report published on Thursday showing unemployment claims in the US had risen to an eight-month high only added to investor optimism. There were some mixed quarterly earnings statements, however, with signs of weakness in the entertainment and car manufacturing sectors.
UK
In the UK, the FTSE 100 closed on Thursday 2% up for the week so far, with the index reaching another all-time high. Despite the news from the US, the Bank of England appears on course to cut rates before the Fed. While the Bank’s Monetary Policy Committee left the base rate unchanged at its Thursday meeting, Governor Andrew Bailey gave the clearest indication yet that he and his colleagues believe inflation is being brought under control. Markets now think there is a 50% chance rates could be cut next month. Elsewhere, there were signs of weakness in the retail sector, but commercial construction activity is starting to recover despite the ongoing slowdown in homebuilding.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 3.8% for the week, while France’s CAC 40 gained 2.9% in a very strong week for European stocks. Interest rate cuts in Switzerland and Sweden raised investor hopes that the European Central Bank could soon follow suit, while strong trade data from China was also welcomed. Figures highlighting weakness in the eurozone construction sector and an unexpected fall in factory orders in Germany are expected to increase the pressure on the ECB to start bringing rates down at its June meeting.
Asia
In Asia, the Hang Seng index in Hong Kong gained 0.3% after government statistics showed a larger-than-expected increase in Chinese exports and imports in April. The data suggested that economic conditions among China’s main trading partners may also be improving. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.4% after data showed a fall in real earnings in the country’s workforce. Disappointing trading statements from a number of companies also hit sentiment.
May 3 | May 9 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8213.5 | 8381.4 | 2.0 |
FTSE 250 | 20164.5 | 20531.3 | 1.8 |
S&P 500 | 5127.8 | 5214.1 | 1.7 |
Dow Jones | 38675.7 | 39387.8 | 1.8 |
DAX | 18001.6 | 18686.6 | 3.8 |
CAC 40 | 7957.6 | 8187.7 | 2.9 |
ACWI | 769.3 | 779.6 | 1.3 |
Hong Kong Hang Seng | 18475.9 | 18537.8 | 0.3 |
Nikkei 225 | 38236.1 | 38074.0 | -0.4 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 9 May 2024.
