Global stock markets held on to their recent gains during what by recent standards has been a relatively uneventful week
There has been little in the way of economic surprises or central bank comments to disabuse investors of the notion that interest rates will soon fall. However, there is still some nervousness around the possibility of a fresh spike in oil prices, with reports suggesting OPEC could implement another round of production cuts before the end of the year. News towards the end of the week of a ceasefire in the conflict between Israel and Hamas helped allay fears of an escalating crisis in the Middle East.
On Wall Street, the Dow Jones Industrial Average ended trading ahead of Thursday’s Thanksgiving Day closure 0.9% up for the week so far, a gain that was matched by the S&P 500. Minutes from the recent Federal Reserve meeting indicated further rate hikes remain unlikely, particularly in light of weakening economic data as home sales decline and business activity cools. Technology stocks reacted negatively to news that a major semiconductor company was facing a fall in sales in the Chinese market due to recently introduced restrictions on the use of foreign-made microchips.
In the UK, the FTSE 100 closed on Thursday 0.3% down for the week so far after Bank of England governor Andrew Bailey warned that stock markets around the world were downplaying the ongoing risks associated with inflation. Business activity reportedly grew in the UK in November, but there were further signs of a slowdown with factory order books weakening and another profit warning in the retail sector. Chancellor Jeremy Hunt’s Autumn Statement on Wednesday proved to be significantly less controversial than the 2022 edition, with markets reacting calmly to news of minor tax cuts for businesses.
In Frankfurt, the DAX index ended Thursday’s session up 0.5% for the week, while France’s CAC 40 gained 0.6%. Minutes from the European Central Bank’s most recent meeting suggest policymakers think inflation is coming under control more quickly than expected, although it also warned of rising stress levels in the financial sector as customer defaults rise. The German economy has reportedly contracted less severely than expected in November, but business activity across the eurozone has fallen for a sixth consecutive month.
In Asia, the Hang Seng index in Hong Kong gained 2.6% after the Chinese government indicated it would provide further support for developers in the country’s stricken real estate sector. This news helped calm nerves after central bankers in China decided to leave interest rates unchanged, and a major asset management company warned it was facing financial difficulties due to its links to property firms. Japan’s Nikkei 225 index of leading shares fell 0.4%, meanwhile, having reached a 33-year high at the start of the week. Stocks fell back as investors took profits, while signs of a domestic slowdown and concerns about the semiconductor sector also hit sentiment.
Hong Kong Hang Seng
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 23 November 2023.