Global stock markets continued to struggle this week as investors’ hopes of an interest rate cut in the United States faded further.
Downbeat comments from senior members of the Federal Reserve mean that bond traders are now not pricing in an initial cut until November. This is a stark turnaround from the consensus view at the start of 2024, when multiple rate reductions were expected throughout this year.
Share prices were also hit by disappointing corporate earnings statements, particularly within the technology sector, while the price of oil and other commodities weakened due to signs of lacklustre economic growth.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 2.5% down for the week so far, with the S&P 500 falling 1.3%. Comments from senior Fed policymakers on Tuesday indicated that the central bank could delay its expected loosening of monetary policy. They also suggested that the possibility of further increases in interest rates had not been ruled out. Quarterly results published late on Wednesday by a major business software company sparked further losses due to signs that the firm’s adoption of artificial intelligence had not yet translated into higher revenues.
UK
In the UK, the FTSE 100 closed on Thursday 1% down for the week so far after falling oil and metals prices weighed on the index. Crude prices had started the week strongly on expectations of an imminent production cut among OPEC (Organization of the Petroleum Exporting Countries) members, but fell back on data that showed weaker economic performance in the US. Despite the collapse of a high-profile takeover bid in the mining sector, there was further deal activity in the UK market. Retail sales showed signs of a recovery in May, but businesses in the sector said they planned to reduce investment due to the challenging economic environment.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 1% for the week, while France’s CAC 40 fell 1.4%. While the European Central Bank is widely expected to cut rates at its policy meeting next week, investors remain unsure about the subsequent direction of travel. A rise in the rate of inflation in Germany could give the ECB reason to delay further reductions, and with unemployment in the eurozone reaching a record low this week, policymakers may decide that additional stimulus is not yet necessary.
Asia
In Asia, the Hang Seng index in Hong Kong fell 2%, with share prices declining on signs of higher-for-longer interest rates in the US, as well as further concerns about China’s real estate sector. Two more cities announced plans to relax restrictions on property sales this week, but investors remain unconvinced that the policy will significantly improve the fortunes of the country’s beleaguered housing developers. Japan’s Nikkei 225 index of leading shares declined 1.5% as rising yields on government bonds led to losses. Investors increasingly expect the Bank of Japan to tighten monetary policy further in the weeks ahead. Meanwhile, recent data showed that consumer confidence had slipped back this month.
May 24 | May 30 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8317.6 | 8231.1 | -1.0 |
FTSE 250 | 20770.9 | 20670.9 | -0.5 |
S&P 500 | 5304.7 | 5235.5 | -1.3 |
Dow Jones | 39069.6 | 38111.5 | -2.5 |
DAX | 18693.4 | 18514.1 | -1.0 |
CAC 40 | 8095.0 | 7978.5 | -1.4 |
ACWI | 791.6 | 781.1 | -1.3 |
Hong Kong Hang Seng | 18608.9 | 18230.2 | -2.0 |
Nikkei 225 | 38646.1 | 38054.1 | -1.5 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 30 May 2024.
