Market Monitor – 26 January 2024

Market Monitor

Global stock markets have shaken off their January blues this week and made solid gains, as investors welcomed positive economic data and upbeat company earnings reports.

Indexes on both sides of the Atlantic hit record highs, boosted by continued optimism around the potential for artificial intelligence (AI) to drive growth in the technology sector, as well as news that the Chinese government was planning further stimulus measures. However, the picture was not entirely positive with research showing the impact of hostilities in the Middle East on international supply chains, and oil prices rose again – potentially adding to inflationary pressures.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.5% up for the week so far, with the S&P 500 gaining 1.1% to reach an all-time high. Technology stocks extended last week’s AI-fuelled gains, while company earnings reports for the final three months of 2023 have so far largely come in ahead of analysts’ expectations. Figures published on Thursday showed that the economy grew more quickly than predicted in the fourth quarter, while consumer spending remained resilient. With inflation now seemingly under control, hopes are high that a soft landing from the recent period of monetary tightening is a genuine possibility.


In the UK, the FTSE 100 closed on Thursday 0.9% up for the week so far. News of fresh stimulus measures in China and concerns about global trade led to rises in oil prices and consequent gains among Britain’s major energy companies. On the other hand, economic data was mixed: on the negative side, there were signs the economy may have shrunk in the fourth quarter of 2023, warnings of a rise in company insolvencies and further declines in retail sales. However, separate research highlighted further expansion in the services sector, while banks continue to cut mortgage rates.


In Frankfurt, the DAX index ended Thursday’s session up 2.1% for the week at a new high, while France’s CAC 40 gained 1.3%. As expected, the European Central Bank left interest rates unchanged at its meeting on Thursday, with President Christine Lagarde repeating that talk of rate cuts is premature. However, ECB data showed that inflation expectations among businesses and consumers continues to fall. Combined with the possibility of the eurozone falling into recession, policymakers may decide to loosen monetary policy sooner rather than later. Separately, data from Germany showed the impact of disruption in Red Sea shipping routes on the country’s chemicals industry. Several major European logistics firms are now re-rerouting supply chains to avoid the region.


In Asia, the Hang Seng index in Hong Kong surged 5.9% after authorities in Beijing announced a huge stimulus package aimed at shoring up China’s stock markets. Share prices also rose in response to the news that the founders of a major technology company planned to purchase a chunk of its shares, while investors welcomed the news that regulators were cutting bank capital requirements in a bid to boost lending. Japan’s Nikkei 225 index of leading shares, meanwhile, advanced 0.8%. The Bank of Japan maintained its current policy of negative interest rates as widely forecasted, but markets increasingly expect some form of monetary tightening in the months ahead.

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 25 January 2024.

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