Market Monitor – 12 May 2023

Market Monitor – 12 May 2023

Global stock markets have extended their recent losses this week due to renewed concerns about financial sector stability and a fresh round of lacklustre economic data

The news that another American regional bank had seen a surge in customers withdrawing deposits over fears the institution was on the verge of collapse threatened to become a self-fulfilling prophecy on Wednesday and Thursday, and sparked a new wave of contagion fears.

Meanwhile, a slight fall in the rate of price rises in the US only served to highlight how stubbornly inflation has remained above the Federal Reserve’s 2% target since peaking in June last year.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.1% down for the week so far, with the S&P 500 shedding 0.1%. News of a decline in US inflation was welcomed by technology businesses, which will benefit to a greater degree from any future loosening of monetary policy. However, investors’ focus has switched from the Fed’s rate-raising programme to the state of the US economy and ongoing fragility in the financial sector. The latest jobs data showed a rise in vacancies and unemployment claims – signs that the labour market may also be starting to buckle under the strain of high interest rates.

UK

In the UK, the FTSE 100 closed on Thursday 0.6% down for the week so far with further falls in the price of oil and another Bank of England rate hike limiting gains. Investors in Britain are growing increasingly worried about the state of the UK economy, as house prices continue to fall and retail spending drops. The Bank has, however, revised its growth forecasts and no longer expects the UK to enter a recession in 2023, while it predicts inflation will halve to around 5% by the end of the year.

Europe

In Frankfurt, the DAX index ended Thursday’s session down 0.8% for the week, while France’s CAC 40 lost 0.7%. There were gains among the eurozone’s media and travel companies but these were more than offset by weaknesses in miners, car makers and a few large industrial firms. A potential slowdown in the US economy is expected to have a knock-on effect on major European economies.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 1.5%, with the latest economic data suggesting that China’s road to post-pandemic recovery remains challenging. Latest government figures showed that imports had fallen in April, while last month’s rate of inflation also came in below expectations. Meanwhile, Japan’s Nikkei 225 index of leading shares closed just 0.1% lower for the week, as its recent run of comparatively strong performance continued. Although news of weakening demand in the semiconductor sector led to some losses, investors welcomed the news that a major Japanese technology investor was looking to expand its involvement in artificial intelligence.

5 May
11 May
Change (%)
FTSE 100
7778.4
7730.6
-0.6
FTSE 250
19452.5
19266.3
-1.0
S&P 500
4136.3
4130.6
-0.1
Dow Jones
33674.4
33309.5
-1.1
DAX
15961.0
15834.9
-0.8
CAC 40
7432.9
7381.8
-0.7
ACWI
652.5
650.7
-0.3
Hong Kong Hang Seng
20049.3
19743.8
-1.5
Nikkei 225
29158.0
29126.7
-0.1

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 11 May 2023.

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12 May 2023
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