Global stock markets made solid progress this week as signs of slowing inflation in both the United States and UK rekindled hopes of further interest rate cuts
The week started disappointingly with bond yields on both sides of the Atlantic remaining high. Meanwhile, a further rise in oil prices, underpinned by US government plans to impose new sanctions on Russian crude production, added to investor pessimism. Since then, weakening price pressures, solid quarterly earnings reports and news of a potential ceasefire between Israel and Hamas helped markets around the world to bounce back.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 2.9% up for the week so far, with the S&P 500 gaining 1.9%. Last week’s stronger-than-expected jobs figures cast a shadow over trading earlier in the week, but the gloom was dispelled by Wednesday’s inflation reading. Although the headline number came in slightly higher than November, investors welcomed the news that core inflation, which ignores more volatile expenditure like food and energy costs, had recorded a surprise fall. The data was backed up by underperforming retail sales figures and a modest rise in jobless numbers a day later. Meanwhile, earnings reports from the financial sector were largely impressive and bolstered the more positive mood.
UK
In the UK, the FTSE 100 closed on Thursday 1.6% up for the week so far. This came as a surprise fall in the rate of inflation helped calm nerves in the bond markets. The Consumer Prices Index reading for December came in at 2.5% against market expectations of 2.7%. The fall makes it considerably more likely the Bank of England will cut the base rate again at its February meeting. UK GDP was reported to have eked out a 0.1% gain in November, the first rise in three months, while government officials warned that Britain could be one of the economies most severely affected by any tariffs introduced by the incoming Trump administration.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 2% for the week, while France’s CAC 40 rose 2.8%. Stocks across Europe extended recent gains thanks to the wider fall in bond yields, and despite more economic gloom. German GDP was reported to have contracted for a second successive year in 2024, while recruiters reported a decline in business confidence across the eurozone. However, strong corporate results from the luxury goods sector following recent difficulties provided further support later in the week.
Asia
In Asia, the Hang Seng index in Hong Kong gained 2.4% after data showed a surge in Chinese exports and a small, unexpected increase in imports. Investors also welcomed the news that regulators had pledged to ensure greater levels of market stability following the volatility of recent months. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 1.8% on the news that the Bank of Japan was considering another interest rate hike later this month. Reports on Thursday of a rise in Japanese producer prices did little to calm investors’ nerves.
January 10 | January 16 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8251.7 | 8380.9 | 1.6 |
FTSE 250 | 19744.5 | 20527.7 | 4.0 |
S&P 500 | 5826.6 | 5937.3 | 1.9 |
Dow Jones | 41934.0 | 43153.2 | 2.9 |
DAX | 20214.8 | 20611.2 | 2.0 |
CAC 40 | 7425.8 | 7634.7 | 2.8 |
ACWI | 833.9 | 846.7 | 1.5 |
Hong Kong Hang Seng | 19069.7 | 19522.9 | 2.4 |
Nikkei 225 | 39266.4 | 38572.6 | -1.8 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 16 January 2025.
