A miserable month for global stock markets continued this week, with geopolitical concerns and further indications that central banks will be slow to cut interest rates adding to negative sentiment.
Last weekend’s drone and missile attack on Israel by Iran was the latest sign of escalation of the conflict in the Middle East, and investors began the week worried about how Israel would respond. The International Monetary Fund (IMF) warned that a spike in the price of oil could cause a serious shock for the global economy, similar to that seen following Russia’s invasion of Ukraine in early 2022. However, while crude prices rose sharply at the start of the week, they fell back as Israel’s allies urged the country to be measured in its response. Strong economic data in the US and parts of Europe, meanwhile, have made interest rate cuts in the first half of 2024 increasingly unlikely, although upbeat first-quarter trading statements from a number of major corporations have given investors something to cheer in an otherwise gloomy week.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.5% down for the week so far, with the S&P 500 falling 2.2%. Once again, solid economic data in the US has translated into bad news for equities as the chances of the Federal Reserve relaxing monetary policy in the next few months recede. Unexpectedly strong retail sales numbers on Monday were followed by the IMF forecasting 2.7% GDP growth for the American economy this year – by far the highest rate among the G7 nations. The US employment market, meanwhile, shows no sign of being hampered by high borrowing costs. Strong quarterly earnings reports from the banking and technology sector were welcomed, although there were concerns about the outlook for one of the country’s most valuable car manufacturers after it announced major restructuring plans.
UK
In the UK, the FTSE 100 fell back from last week’s highs, and the index closed on Thursday 1.5% lower for the week so far after the declining oil price hit London’s major energy stocks. March’s inflation figure, meanwhile, came in higher than expected as a result of higher fuel costs, with the consumer prices index falling to 3.2% rather than the forecast 3.1%. The news makes it less likely the Bank of England will cut rates before the summer, and by Thursday markets were not pricing in a first reduction until November. Equally worryingly, a fall in the UK employment rate, in particular the ongoing rise in the number of people described as “economically inactive”, raised questions about future growth and productivity in Britain.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 0.4% for the week, although France’s CAC 40 bucked the global trend and edged 0.2% ahead. Economic data in the eurozone remains weak but broadly positive, with industrial production up in March but still at a significantly lower level than 12 months ago. While Germany’s Bundesbank thinks the country’s economy emerged from recession in the first three months of the year, the IMF is forecasting growth of just 0.2% for 2024. Sentiment was also hit by an update from one of Europe’s biggest semiconductor companies that was more pessimistic than expected.
Asia
In Asia, the Hang Seng index in Hong Kong fell 2% as the latest economic data from China showed a possible slowdown in activity in March following a relatively strong start to the year. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 3.7% as the possibility of Bank of Japan intervention to support the weakening yen weighed on the market. Shares in Tokyo were also hit by news of falling business confidence and the weaker outlook from a major European microchip company.
April 12 | April 18 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7995.6 | 7877.1 | -1.5 |
FTSE 250 | 19721.2 | 19450.7 | -1.4 |
S&P 500 | 5123.4 | 5011.1 | -2.2 |
Dow Jones | 37983.2 | 37775.4 | -0.5 |
DAX | 17930.3 | 17850.8 | -0.4 |
CAC 40 | 8010.8 | 8023.3 | 0.2 |
ACWI | 765.7 | 749.4 | -2.1 |
Hong Kong Hang Seng | 16721.7 | 16385.9 | -2.0 |
Nikkei 225 | 39523.6 | 38079.7 | -3.7 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 18 April 2024.
