Market Monitor – 7 July 2023

Market Monitor – 7 July 2023

Global stock markets have endured a turbulent week with fears of further sharp increases in interest rates sparking sell-offs on indexes in Europe and the United States

Latest employment figures published in the US on Thursday suggested that the monetary tightening programme implemented by the Federal Reserve had done little to cool the American jobs market. As a result, officials are again expected to raise interest rates at the end of the month as they continue their battle against inflationary pressures. European markets fell particularly steeply on interest rate rise fears and the latest signs that China’s post-Covid economic recovery was faltering.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.4% down for the week so far, with the S&P 500 shedding 0.9%. Share prices in the US were especially volatile with mixed signals from the recent economic data, while the country’s manufacturing sector was reported to have contracted for a second consecutive month in June. Statistics issued later in the week showed that the US economy added almost 500,000 jobs in June, double most economists’ estimates. Investors believe the Fed now has no choice but to increase rates again at its July meeting to drive inflation down towards its 2% target.

UK

In the UK, the FTSE 100 closed on Thursday 3.3% down for the week so far, falling to its lowest level since the financial sector crisis in March. Persistent high inflation in Britain has driven interest rate expectations sharply higher in recent weeks, with the consensus view suggesting the base rate – which presently stands at 5% – will hit 6.5% by the end of the year. Further rises in government bond yields in recent days have put renewed pressure on mortgage rates. This is yet more bad news for a housebuilding sector that is already contracting at its fastest pace since the global financial crisis of 2008-09.

Europe

In Frankfurt, the DAX index ended Thursday’s session down 3.8% for the week, while France’s CAC 40 lost 4.2%. Expectations of further interest rate rises from the European Central Bank weighed heavily on real estate companies, while worries about slowing growth and weaker consumer spending hit travel and leisure stocks. The latest signs of a highly uneven recovery in China also impacted the eurozone’s biggest exporters to the Far East.

Asia

In Asia, the Hang Seng index in Hong Kong lost 2% as data published this week showed that growth in China’s services sector – the standout performer since Covid-19 restrictions were lifted in late 2022 – had started to decelerate. Tensions between the US and China also harmed sentiment after the Beijing government imposed a ban on the export of certain raw materials to American manufacturers. Shares in China had started the week brightly on hopes that policymakers would increase the scale of stimulus measures introduced at the end of June. Japan’s Nikkei 225 index of leading companies declined 1.3%, with falls among the country’s technology firms occurring after major shareholders in a top-performing semiconductor firm announced the sale of their stakes.

30 June
6 July
Change (%)
FTSE 100
7531.5
7280.5
-3.3
FTSE 250
18416.8
17916.5
-2.7
S&P 500
4450.4
4411.6
-0.9
Dow Jones
34407.6
33922.3
-1.4
DAX
16147.9
15528.5
-3.8
CAC 40
7400.1
7082.3
-4.3
ACWI
682.8
673.8
-1.3
Hong Kong Hang Seng
18916.4
18533.1
-2.0
Nikkei 225
33189.0
32773.0
-1.3

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 6 July 2023.

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7 July 2023
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Global stock markets had a difficult week, with technology stocks in particular giving up some of their recent gains.
Global stock markets had a difficult week, with technology stocks in particular giving up some of their recent gains.
Global stock markets surged ahead this week as the prospect of an interest rate cut in the United States grows ever closer.

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