Global stock markets managed to cling on to their recent gains, continuing their recovery from an early-August slump. This was due to growing certainty that the US Federal Reserve will cut interest rates in the next month.
Data from the US continues to show some signs of weakness, but analysts say the chances of a full-blow recession have receded. Elsewhere, the price of gold rose to a record high as demand from European and US investors increased in advance of expected rate cuts. Oil, meanwhile, fell close to its lowest level of 2024 as the likelihood of a ceasefire in the conflict between Israel and Hamas appeared to grow.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.1% up for the week so far, with the S&P 500 gaining 0.3%. Both indexes have recovered almost all the losses recorded during the highly turbulent period at the start of August. While the latest employment data indicates further weakness, the market reacted more calmly to the figures, while senior Fed officials have made it clear that the time is right for interest rates to be lowered. There was some nervousness in the markets on Thursday, however, as investors awaited a speech on Friday from Fed chair, Jerome Powell.
UK
In the UK, the FTSE 100 closed on Thursday 0.3% down for the week so far, after weakness in oil and metal prices hit London’s major energy and mining companies. There was also mixed news from the British economy, with company insolvencies in England and Wales rising to a post-financial crisis high in the 12 months to the end of July. This was accompanied by a rise in the number of new job vacancies, although latest data from the private sector highlighted resilience in consumer demand. Meanwhile, a downturn in the state of the public finances has increased the likelihood of tax increases from the Labour government in its autumn budget.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.9% for the week, while France’s CAC 40 gained 1%. Economic performance in the eurozone in July was boosted by the Paris Olympics, although activity in Germany remained relatively lacklustre. Forecasts from the Bundesbank, however, indicated the German economy was unlikely to fall back into recession this year. There were losses among producers of luxury goods as trading reports showed weakness in the Chinese market, while defence companies were hit by the news that the German government has refused to provide additional assistance to Ukraine in its war with Russia.
Asia
In Asia, the Hang Seng index in Hong Kong gained 1.2%, but remained well below the 2024 highs recorded in May. Technology stocks performed well towards the end of the week as hopes of a cut in US interest rates grew. Fears of an escalating trade war with the European Union grew as Chinese officials opened a probe into dairy imports from the bloc. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 0.4% as latest figures showed a likely expansion in the Japanese economy in August. Investors in Tokyo remain cautious due to uncertainty around the Bank of Japan’s next moves in monetary policy.
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 22 August 2024.