Global stock markets edged ahead during a turbulent week marked by the publication of contrasting economic data.
While steady declines in inflation rates in recent months have raised hopes that central banks will soon start cutting interest rates, the news on Tuesday that the consumer price index (CPI) in the United States had fallen more slowly than expected in January led to sharp share-price losses around the world. On Thursday, however, it was a different story as markets welcomed figures that highlighted weakness in US consumer spending, with sales across the retail and hospitality industries coming in below consensus forecasts. While this is undoubtedly a negative development for businesses in those sectors, the news was expected to put pressure on the Fed to loosen monetary policy sooner rather than later.
Elsewhere, new data showed slowing growth in Europe and Japan, while uncertainty over tensions in the Middle East led to renewed volatility in oil and commodity prices.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.3% up for the week so far, with the S&P 500 gaining 0.1% to consolidate its breaking of the 5,000-point barrier last week. Gains during Thursday’s session offset losses earlier in the week after Tuesday’s disappointing 3.1% inflation figure, but there are still signs the American jobs market remains in robust health – potentially adding to upward price pressures over the coming months. Investors welcomed comments from a senior Fed official who said rate cuts should be considered even while inflation remained above the 2% target.
UK
In the UK, the FTSE 100 closed on Thursday 0.3% up for the week so far after data showed inflation in Britain had remained at 4% in January, rather than rising to 4.2% as economists had expected. The news led to weakness in the pound, to the benefit of the many multinationals listed in London, and increased hopes of imminent interest rate reductions. However, figures showing that wage increases were running above inflation took some of the shine off the CPI news, with Bank of England governor Andrew Bailey telling lawmakers it would be difficult to cut rates while earnings are rising so strongly. Investors were largely indifferent to the news on Thursday that UK GDP had contracted in the final three months of 2023, putting the British economy into a technical recession.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.7% for the week, while France’s CAC 40 gained 1.3%. Investors continue to bet on the European Central Bank cutting interest rates soon in response to economic weakness across the eurozone: GDP across the bloc was unchanged in the final quarter of last year, while the German economy shrank by 0.3%. Analysts now expect German GDP to fall by 0.5% this year. Elsewhere, there were strong gains in the pharmaceutical sector but a profit warning was issued from one of Europe’s largest brewers in response to sharp rises in costs.
Asia
In Asia, the Hang Seng index in Hong Kong gained 1.3% in a week that was shortened by the extended new year holiday. However, shares recorded gains on Wednesday and Thursday, following positive consumer spending data and upbeat outlooks among technology businesses. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 3.4% and reached another record high despite reports that indicated the Japanese economy had fallen into recession at the end of 2023.
February 9 | February 15 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7572.6 | 7597.5 | 0.3 |
FTSE 250 | 19062.3 | 19099.6 | 0.2 |
S&P 500 | 5026.6 | 5029.7 | 0.1 |
Dow Jones | 38671.7 | 38773.1 | 0.3 |
DAX | 16926.5 | 17046.7 | 0.7 |
CAC 40 | 7647.5 | 7743.4 | 1.3 |
ACWI | 747.9 | 750.3 | 0.3 |
Hong Kong Hang Seng | 15746.6 | 15944.6 | 1.3 |
Nikkei 225 | 36897.4 | 38157.9 | 3.4 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 15 February 2024.