Market Monitor – 28 July 2023

Market Monitor

Global stock markets have had a positive week despite further rises in interest rates within Europe and the United States.

Both the European Central Bank and Federal Reserve increased rates by 25 basis points, as investors had expected, and share prices rose on hopes that these hikes could mark the end of the current period of monetary tightening in the eurozone and America respectively. However, further strong economic data from the US on Thursday as well as fears of possible rate rises in Asia dampened sentiment towards the end of the week.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.2% up for the week so far, with the S&P 500 advancing by just a solitary point. With the Fed’s rate hike already priced in, investors were more interested in the latest company earnings statements, which continued to demonstrate significant levels of corporate resilience. Official data for the second quarter of 2023, meanwhile, showed that the American economy grew at an annualised rate of 2.4%, with growth underpinned by relatively buoyant consumer spending. While this news indicates that higher interest rates have not yet had a damaging effect, investors fear it raises the possibility of further Fed action in September.


In the UK, the FTSE 100 closed on Thursday 0.4% up for the week so far as the index continued its recovery from its slump at the start of the month. Earnings statements painted a mixed picture for London-listed businesses, with strength in aerospace and power companies offset by falling profits in the financial sector. The departure of the CEO of one of the country’s biggest banks following a political row did little to improve sentiment, while new data suggested private-sector growth had slowed to a six-month low. However, recent forecasts from the International Monetary Fund (IMF) suggested the UK economy would expand more rapidly than previously thought in 2023.


In Frankfurt, the DAX index ended Thursday’s session up 1.4% for the week, while France’s CAC 40 gained 0.4%. European shares continued to benefit from optimism about China’s post-Covid recovery, with results from firms in the luxury-goods sector in particular beating expectations. Investors also welcomed comments from ECB president Christine Lagarde following the bank’s decision to raise interest rates again. While Lagarde did not rule out further hikes, she suggested that the ECB would be able to pause its monetary tightening programme given the right economic conditions.


In Asia, the Hang Seng index in Hong Kong rose 3% with Chinese markets welcoming concrete plans from the Beijing government to stimulate the economy. Gains were especially strong in the property and technology sectors, both of which have suffered heavy losses over recent months. Japan’s Nikkei 225 index of leading shares advanced 1.8% following gains in China and hopes of an end to rate rises in major Western markets. However, gains were limited later in the week by reports that the Bank of Japan could be considering a more hawkish approach towards monetary policy.

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 27 July 2023.

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