Global stock markets had a volatile week as investors struggle to work out exactly when central banks will start cutting interest rates.
Further attacks on commercial shipping in the Red Sea and renewed tensions between Iran and Pakistan have added to the geopolitical concerns raised by the Israel-Palestine conflict in Gaza. Cautious comments from central bankers on both sides of the Atlantic, meanwhile, dampened investors’ hopes of imminent interest rate cuts. Furthermore, weak economic data from China appears to have increased the prospect of sluggish global growth in 2024.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.3% down for the week so far, with the S&P 500 declining 0.1%. A warning from a senior Federal Reserve official that any loosening of monetary policy may be several months away led to falls in share prices earlier in the week. These comments were backed up by data that showed continued strength in consumer spending and the jobs market. Despite concerns around interest rates, technology stocks performed positively on Wednesday and Thursday after the outlook for a major electronics firm was upgraded by analysts.
UK
In the UK, the FTSE 100 closed on Thursday 1.5% down for the week so far, with Monday’s 4% fall in crude values – sparked by Saudi Arabia’s decision to cut export prices – weighing on the index’s major energy stocks. There were renewed signs of weakness in the British employment market, with a large recruitment firm warning of a slowdown in hiring. But analysts said the UK was on course to bring inflation down below its 2% target in the first half of the year, and sentiment was further boosted by relatively upbeat trading statements from construction sector firms.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 0.8% for the week, while France’s CAC 40 lost 0.9%. Senior European Central Bank officials echoed their counterparts in the US, emphasising that multiple rate cuts this year should not be seen by investors as a foregone conclusion. There were fresh signs of weakness in the German economy, while construction activity across the eurozone was reported to have fallen at its most rapid pace in three years at the end of 2023.
Asia
In Asia, the Hang Seng index in Hong Kong slumped 5.2% after official data showed the Chinese economy had contracted more quickly than investors had expected in the final three months of last year. The Hang Seng index is now almost 30% lower than it was at the start of 2023. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.3%, having hit a 34-year high earlier in the week as the yen weakened further against the US dollar. Semiconductor company shares performed well following a positive trading statement from a leading Taiwanese firm in the sector, although there are signs that industrial production in Japan is starting to slow.
January 12 | January 18 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7624.9 | 7459.1 | -2.2 |
FTSE 250 | 19197.6 | 18948.0 | -1.3 |
S&P 500 | 4783.8 | 4780.9 | -0.1 |
Dow Jones | 37593.0 | 37468.6 | -0.3 |
DAX | 16704.6 | 16567.4 | -0.8 |
CAC 40 | 7465.1 | 7401.4 | -0.9 |
ACWI | 724.8 | 717.0 | -1.1 |
Hong Kong Hang Seng | 16244.6 | 15391.8 | -5.2 |
Nikkei 225 | 35577.1 | 35466.2 | -0.3 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 18 January 2024.
