Global stock markets bounced back from last week’s losses on renewed hopes of imminent interest rate cuts.
While the Bank of England (BoE) declined to follow the European Central Bank’s (ECB) lead and chose to leave the base rate on hold at its Thursday meeting, policymakers were clear that an initial reduction was likely either in August or September. Uncertainty persisted in France following the news of a snap election, with worries over the sustainability of the country’s public finances remaining a concern. However, markets in Europe managed to recover some of their recent declines as investors sought buying opportunities. Meanwhile, oil prices rose back towards recent highs on fears of escalating tensions between Israel and Hezbollah, the Lebanese Islamist organisation.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.4% up for the week so far, with the S&P 500 gaining 0.8%. Economic data from the US reinforced investors’ hopes that the Federal Reserve will cut interest rates at its September meeting: May’s retail sales figures showed little sign of growth, while there were further indications that the jobs market is starting to slow. These recent gains were once more underpinned by advances in mega-cap technology stocks, while recent stock market performance by smaller American companies has been underwhelming.
UK
In the UK, the FTSE 100 closed on Thursday 1.5% up for the week so far after the BoE sent its clearest message yet that rates are likely to be cut in the summer. Investors and policymakers welcomed the news that inflation in Britain had fallen to its long-term target level of 2% in May, while there was further good news in the shape of a decline in company insolvencies last month. At the start of the week, the UK regained its position as Europe’s biggest stock market by value from its rival in Paris, following recent falls in the prices of French stocks.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 1.3% for the week, while France’s CAC 40 gained 2.3%. Despite this positive performance, European markets remain some way off their recent highs due to concern around the political situation in France. European Union officials warned their counterparts in France and several other eurozone member states that they were running excessively large deficits. However, positive news helped to drive gains later in the week: analysts raised their forecasts for GDP growth in Germany, while a senior ECB member said he expected “one or two” more interest rate cuts this year.
Asia
In Asia, the Hang Seng index in Hong Kong gained 2.2% as investors hoped the Chinese government would provide more stimulus measures in the face of slowing industrial production levels and a slump in the price of new homes. The data has put pressure on China’s central bank to cut interest rates in order to boost demand. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.5% following the publication of figures that highlighted a downturn in both manufacturing output and confidence. Investors increasingly expect the Bank of Japan to raise rates at its August meeting to combat rising inflation.
June 14 | June 20 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8146.9 | 8269.0 | 1.5 |
FTSE 250 | 20120.4 | 20502.0 | 1.9 |
S&P 500 | 5431.6 | 5473.2 | 0.8 |
Dow Jones | 38589.1 | 39134.8 | 1.4 |
DAX | 18002.0 | 18237.8 | 1.3 |
CAC 40 | 7503.3 | 7676.1 | 2.3 |
ACWI | 797.3 | 804.4 | 0.9 |
Hong Kong Hang Seng | 17941.8 | 18335.3 | 2.2 |
Nikkei 225 | 38814.6 | 38633.0 | -0.5 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 20 June 2024.
