Global stock markets have endured another challenging week as a result of signs that policymakers are struggling to keep inflation in check in the United States.
An unexpected rise in the March consumer price index figure led to increases in US Treasury yields, with investors now resigned to a maximum of two Federal Reserve interest-rate cuts this year. This represents a significant downgrade on the three or four reductions that were being widely forecast at the start of 2024. Meanwhile, ongoing geopolitical tensions in the Middle East, Ukraine and the Far East have done little to calm nerves, with oil prices remaining elevated and gold, often seen as a ‘safe haven’ asset, hitting an all-time high this week.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.1% down for the week so far, with the S&P 500 falling 0.1%. Losses were particularly sharp on Wednesday after March’s inflation print was published, but news of unexpectedly weak producer price data on Thursday helped share prices to stage a partial recovery. Positive trading news from companies in the travel sector was another source of optimism and a reminder that, while the resilience of the American economy may make interest-rate cuts less likely, it does offer some upside for stock markets.
UK
In the UK, the FTSE 100 closed on Thursday 0.2% up for the week so far, supported by buoyant oil and precious metal prices. Economic news remained mixed: retail sales in March were helped by the early Easter, but financial regulators warned that default rates on mortgages and loans are likely to rise over the months ahead. Bank of England officials, meanwhile, echoed their counterparts in the US in saying that markets may have underestimated how straightforward it would be to bring inflation back to target. Analysts now think it is unlikely the Bank will cut the base rate before August.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 1.3% for the week, while France’s CAC 40 lost 0.5%. These declines came despite the latest indications that the European Central Bank will be the first to relax monetary policy this year. The ECB kept rates on hold at Thursday’s meeting but president Christine Lagarde gave the clearest indication yet that she believes the battle against inflation is being won. Economic weakness in the eurozone could well force the ECB’s hand at its next meeting in June: new figures from Germany showed a decline in exports in February as a well as a record high for company bankruptcies.
Asia
In Asia, the Hang Seng index in Hong Kong gained 2.2% as its recent recovery continued. Investors shrugged off the news that a major ratings agency had downgraded China’s credit due to ongoing issues in its financial and real estate sectors, and instead focused on the optimistic 2024 growth forecasts issued by two international investment banks. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 1.2% to remain within touching distance of its recent record highs. The Tokyo market was particularly strong at the start of the week on news of a multi-billion-dollar investment by a major US technology firm in Japanese artificial intelligence developers, as well as reports of a recent surge in bank lending.
April 5 | April 11 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7911.2 | 7923.8 | 0.2 |
FTSE 250 | 19725.9 | 19786.9 | 0.3 |
S&P 500 | 5204.3 | 5199.1 | -0.1 |
Dow Jones | 38904.0 | 38459.1 | -1.1 |
DAX | 18175.0 | 17946.3 | -1.3 |
CAC 40 | 8061.3 | 8023.7 | -0.5 |
ACWI | 776.5 | 774.9 | -0.2 |
Hong Kong Hang Seng | 16732.9 | 17095.0 | 2.2 |
Nikkei 225 | 38992.1 | 39442.6 | 1.2 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 11 April 2024.
