Global stock markets enjoyed a largely positive week, although optimism was tempered on Thursday by concerns that continued strength in the American labour market could force the Federal Reserve to tighten monetary policy further
Fed Chair Jerome Powell warned in a speech on Wednesday that the future path of inflation – in both the US and Europe – remained very difficult to predict. Powell’s remarks came as a warning to investors on both sides of the Atlantic, who are increasingly expecting slowing price rises to lead to cuts in interest rates in 2024. While slowing global growth and a dip in oil prices from recent highs are helping to reduce inflationary pressures, recent data showing a lower-than-expected number of new unemployment claims in the US reminded markets that further efforts may be needed to tame inflation in the world’s largest economy.
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 back by 0.3%. Until Thursday’s negative session, stocks in the US had been enjoying their longest winning streak for more than two years, with shares in technology companies in particular advancing as interest rate fears receded. Solid third-quarter earnings reports from some major consumer-facing businesses also helped to boost investor sentiment.
In the UK, the FTSE 100 closed on Thursday 0.5% up for the week so far, with share prices in London managing to eke out gains despite falls in oil and other commodity prices and further signs of deterioration in the British economy. The week started brightly with the Bank of England’s chief economist saying interest rate cuts were possible at some point in 2024, perhaps as early as summer, while UK car sales continue to show considerable resilience. However, data also showed a dip in retail sales overall in October, while separate figures indicated a sharp rise in the number of mortgage borrowers – landlords in particular – falling into arrears on their repayments.
In Frankfurt, the DAX index ended Thursday’s session up 1.1% for the week, while France’s CAC 40 gained 0.9%. Weakening economic data across the eurozone added weight to the idea that the European Central Bank will make no further attempts to tighten monetary policy in the current cycle. However, the outlook for European businesses is becoming bleaker, with Germany reporting further downturns in construction and manufacturing alongside retail sales dipping across the region.
In Asia, the Hang Seng index in Hong Kong fell 0.9% as fresh signs of weakness in the Chinese economy dominated sentiment. Figures published on Tuesday showed that exports from China had fallen for the sixth consecutive month in October, while data issued on Thursday showed that prices across the country had fallen by 0.2% last month, despite the government’s recent stimulus efforts. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 2.2% after research showed an increase in confidence in the manufacturing sector. Stocks in Tokyo were also lifted by strong third-quarter trading reports from a number of major firms.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 9 November 2023.