Global stock markets enjoyed mixed fortunes this week, with investors remaining concerned that central banks may be forced to keep interest rates at or near current levels for longer than expected
Ongoing strength in the US economy and the potential impact of president-elect Donald Trump’s economic policies could prevent inflation from falling to the Federal Reserve’s 2% target, making it difficult for officials to significantly ease monetary policy in 2025. Recent rises in the price of oil following spells of cold weather in the northern hemisphere, as well as supply constraints in the US and the Middle East, have added to inflationary pressures, while government borrowing costs have risen on both sides of the Atlantic.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Wednesday 0.2% down for the week so far, with the S&P 500 falling 0.4%. Stock markets in America were closed on Thursday for the funeral of former president Jimmy Carter. The week started on a positive note following reports that the incoming Trump administration may be planning to water down its plans for wide-ranging tariffs on imports from China, Mexico and other major trading partners. However, there were sharp falls on Tuesday after data showed a stronger-than-expected rise in prices in the services sector alongside ongoing resilience in the employment market. Both factors could reduce the likelihood of interest rate cuts in the short term.
UK
In the UK, the FTSE 100 closed on Thursday 1.1% up for the week so far after rising oil and commodity prices, as well as a fall in the value of sterling, helped drive blue-chip stocks higher. The FTSE’s gains masked underlying weakness in the UK economy and sharp increases in government bond yields, with rates on 30-year gilts rising through the week to their highest level since 1998. The domestically focused FTSE 250 Index fell by almost 3% as retailers reported disappointing sales over the Christmas period, and output in the construction sector fell to a six-month low. There was better news on Thursday when a Bank of England official suggested another interest rate cut was likely in February due to the lacklustre pace of growth in Britain.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 2.1% for the week, while France’s CAC 40 gained 2.9%. European governments have been largely unscathed by the recent rises in borrowing costs experienced in the US and UK. This has helped share prices across the eurozone to add to recent gains. Lower bond yields in the bloc are mainly due to expectations of several further rate cuts from the European Central Bank in 2025 as policymakers grapple with sluggish growth. Although eurozone inflation rose to 2.4% in December, the increase was in line with expectations and the ECB remains on course to cut rates for the fifth time since June at the end of this month.
Asia
In Asia, the Hang Seng index in Hong Kong fell 2.6% on weak economic data and reports that the US government intended to impose sanctions and trading restrictions on some of China’s largest companies. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.7% as research showed consumer confidence in the country had dropped in December. Stocks in Tokyo were also hit by disappointing inflation figures from China on Thursday.
January 3 | January 9 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8224.0 | 8314.8 | 1.1 |
FTSE 250 | 20591.4 | 20005.1 | -2.8 |
S&P 500 | 5942.5 | 5918.3 | -0.4 |
Dow Jones | 42732.1 | 42635.2 | -0.2 |
DAX | 19906.1 | 20317.2 | 2.1 |
CAC 40 | 7282.2 | 7490.3 | 2.9 |
ACWI | 847.2 | 845.6 | -0.2 |
Hong Kong Hang Seng | 19760.3 | 19240.9 | -2.6 |
Nikkei 225 | 39894.5 | 39605.1 | -0.7 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 9 January 2025.
