Global stock markets have experienced a mixed week as economic concerns and downbeat company trading statements have acted to limit gains
There are growing signs that the tighter monetary policy that has been ongoing in developed nations since early 2022 is starting to have a clear impact on business activity: unemployment rates are on the rise on both sides of the Atlantic, while several major corporations have this week warned of potentially turbulent trading conditions in the months ahead.
A possible silver lining of these developments is the likelihood that central banks, in the UK and United States in particular, will soon have no choice but to bring their programmes of interest rate rises to a halt – even though inflation has not yet been brought under control. Looser monetary policy could help stimulate economic activity again, but at the risk that price rises will start to accelerate once more.
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.3% down for the week so far, with the S&P 500 dropping back 0.2%. First-quarter earnings reports have done little to lift spirits in recent days, with underwhelming statements from the banking sector and a worrying set of figures from one of the country’s most highly valued carmakers. Meanwhile, a rise in the weekly jobless figures and disappointing manufacturing data have added to the pressure on the Federal Reserve to leave interest rates untouched at its May meeting.
In the UK, the FTSE 100 closed on Thursday 0.4% up for the week so far, despite a fall in commodity prices as concerns about global growth in 2023 re-emerged. Gains in London were also limited by a rise in unemployment and inflation figures which showed UK prices were continuing to increase at an annual rate above 10% – the highest level in Western Europe. However, solid earnings reports from major retailers and travel companies helped to keep the index in positive territory.
In Frankfurt, the DAX index ended Thursday’s session down 0.1% for the week, while France’s CAC 40 gained 0.3%, having hit a record high during Monday’s session. Investors in Europe remain worried that the European Central Bank will impose another 0.5 percentage point interest rate increase next month despite the recent dip in headline eurozone inflation. However, strong economic growth in China helped to support advances among businesses with exposure to markets in the Far East.
In Asia, the Hang Seng index in Hong Kong dipped 0.2% despite figures showing that Chinese GDP had increased at a faster rate than expected in the first three months of the year. Closer analysis indicated that the expansion had been uneven, with the lack of a sustained recovery in the property sector being a major concern. Technology stocks performed well on optimism about the potential of artificial-intelligence services to drive growth. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 0.6% to continue their recent run of good form. Latest data showed a sharp rise in exports in March while retail stocks gained – thanks to the return of foreign visitors to the country.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 20 April 2023.