As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.
Last week, the U.S. stock market ended its three-week downturn, buoyed by an active earnings reporting season for the first quarter. The S&P 500 Index saw a notable rebound, with a 3.7% increase in earnings from the previous year, surpassing expectations based on a decade's averages. Technology stocks, particularly the Nasdaq Composite Index, demonstrated strong performance, led by significant gains in companies like Apple and a notable recovery in NVIDIA. Alphabet also experienced a surge following impressive earnings and the announcement of its first dividend payment. However, Meta Platforms faced a steep decline after announcing continued heavy investments in new technologies.
Mixed economic signals were evident throughout the week. The U.S. manufacturing sector slipped back into contraction, indicating a possible easing on inflation and interest rate pressures, which initially was seen as positive for the markets. However, by Thursday, the narrative shifted as economic growth data came in lower than expected, highlighting a slowing economy. Despite this, Friday saw a slight recovery in stock prices following a favorable report on core inflation, which showed a modest decline, continuing a trend that began in the previous year. Overall, the week closed with a cautious optimism, reflected in strong demand in the bond markets.
In Europe, the financial markets experienced a rebound, with the STOXX Europe 600 Index breaking a three-week losing streak and closing up by 1.74%. This uptick was supported by a de-escalation of tensions in the Middle East and positive corporate earnings. Germany’s DAX led the gains among major indexes, while the UK's FTSE 100 reached new highs, driven by robust performances across various sectors.
Interest rates in the region mirrored the global environment, with yields on government bonds reaching their highest levels this year. This is partly due to expectations that the European Central Bank (ECB) might delay rate cuts, a sentiment echoed by key policymakers expressing caution over the economic outlook. Business activity indicators like the Eurozone Composite Purchasing Managers’ Index suggested growth, particularly in the services sector, which may indicate that the economic downturn is stabilizing. However, the ongoing challenges with inflation, especially in services, remain a significant concern for the region.
Turning to Asia, Japan's financial markets showed positive dynamics, with significant gains in both the Nikkei 225 and the TOPIX Index, despite the yen reaching historic lows against the dollar. The Bank of Japan maintained its monetary policy, which is seen as a supportive factor for the markets. Inflationary pressures in Tokyo showed signs of easing, which may indicate a stabilizing economic environment.
In China, the stock market indices like the Shanghai Composite and the CSI 300 saw upward movements as investor sentiment improved over optimistic economic forecasts. The Hang Seng Index in Hong Kong notably soared by 8.8%. Despite the positive momentum, the People’s Bank of China held interest rates steady, reflecting a more cautious approach to monetary easing. This cautious stance aligns with recent actions to withdraw liquidity from the banking system, suggesting a strategic shift in managing economic growth amidst ongoing challenges in the property sector and declining producer prices.
Overall, the global markets last week reflected a complex interplay of economic data, monetary policies, and investor sentiment, showing signs of cautious optimism in some areas, while highlighting underlying economic vulnerabilities in others.
