Global stock markets ended a strong month on a generally positive note as investors continue to hope that central banks will soon be able to start cutting interest rates
Fresh signs that inflation is being brought under control in the United States, and upbeat comments from a senior decision maker at the Federal Reserve, led to share price gains around the world on Wednesday and Thursday. Fears that rising oil prices could cause further economic turbulence receded as reports suggested Saudi Arabia was struggling to find support from fellow OPEC members to implement planned production cuts. Crude oil values came under further pressure from concerns that ongoing problems in China’s financial and property sectors could spill over into the country’s wider economy.
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.6% up for the week so far, with the S&P 500 gaining 0.2%. November proved to be the best month of 2023 for US markets as expectations of interest rate cuts have grown. The news that the Fed’s main inflation measure, the personal consumption expenditures (PCE) price index, had risen at its slowest rate in more than two years in October only added to investor optimism. Signs of the resilience of the American economy continue to emerge, with the third-quarter output figure revised upwards and signs of increasing business investment. Consumer confidence also increased in November for the first time in several months.
In the UK, the FTSE 100 closed on Thursday 0.5% down for the week so far as declining oil and commodity prices limited gains among the numerous energy and mining stocks on the index. The likelihood of rate cuts in Britain seems a little more remote than in the US, with Bank of England governor, Andrew Bailey, warning that it was “too soon” to start talking about easing monetary policy while inflation remains well above target. Further falls in property prices were reported this week, while retailers are worried that spending over the Christmas period could be considerably weaker than usual.
In Frankfurt, the DAX index ended Thursday’s session up 1.2% for the week, while France’s CAC 40 gained 0.2%. European stocks advanced after reports of another decline in inflation in Germany, which was seen to increase the chances of eurozone interest rate cuts. However, European Central Bank president, Christine Lagarde, warned that pressure from wage growth could complicate the picture for policymakers. High borrowing costs have driven lending across the eurozone to an eight-year low, while confidence among German consumers fell in November.
In Asia, the Hang Seng index in Hong Kong dropped 2.9% on reports that a major financial firm was facing a criminal investigation after becoming insolvent. It is thought that the company made significant losses through its dealings in China’s real estate sector, and investors are concerned that other financial businesses could be facing similar problems. Recent economic data did little to help sentiment, with factory activity recording a surprise decline in November. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.4% as a rise in the value of the yen held back international stocks and investors took profits following the recent strong run. Retail sales continue to grow and the Japanese parliament approved stimulus measures on Thursday.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 30 November 2023.