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.
The U.S. stock market ended mixed, with the S&P 500 Index nearly matching its longest winning streak in almost two decades, while the Nasdaq Composite marked its ninth consecutive gain. However, this rally was narrowly driven, with an equal-weighted version of the S&P 500 lagging behind its market-weighted counterpart. Growth indexes were supported by strong earnings from tech-oriented firms, particularly high-valuation software stocks. U.S. Treasury debt auctions significantly influenced market sentiment, with well-received auctions of three-year and 10-year notes boosting confidence. However, a weak 30-year bond auction led to a break in the major indexes’ winning streaks. Economic data was generally as expected, except for a drop in consumer sentiment to a six-month low, partly due to geopolitical tensions. Treasury yields decreased mid-week but climbed following the 30-year bond auction and comments from Fed Chair Jerome Powell about the need for further monetary tightening to achieve inflation targets.
In Europe, the STOXX Europe 600 Index slightly declined amid diminished optimism about peaking interest rates. Major stock indexes showed mixed results, with France’s CAC 40 remaining flat, Germany’s DAX slightly rising, and Italy’s FTSE MIB and the UK’s FTSE 100 experiencing losses. European bond yields increased, reflecting concerns about persistently high interest rates. ECB President Christine Lagarde indicated that rate cuts were not imminent. In the UK, Bank of England Governor Andrew Bailey downplayed discussions of rate cuts, aligning with the stagnant growth forecast in UK GDP. Retail sales in the Eurozone continued to fall, and German industrial output shrank, highlighting economic challenges in the region. Portugal announced a snap election following a corruption probe into the ruling Socialist administration.
Japanese stocks gained, with the Nikkei 225 and TOPIX Indexes rising due to strong corporate earnings, government economic stimulus, and currency depreciation. The yen weakened further, influenced by hawkish remarks from the U.S. Federal Reserve. Bank of Japan Governor Kazuo Ueda warned of challenges in normalizing short-term interest rates, maintaining a dovish monetary stance. The government approved a significant stimulus package to bolster the economy and address inflationary pressures. In China, stocks showed modest gains despite concerns about deflation, with the consumer price index falling and producer prices continuing to decline. Trade data presented a mixed picture, with exports decreasing but imports showing unexpected growth, indicating ongoing economic challenges. The overall trade surplus decreased, and analysts anticipate further stimulus measures from the government to counter deflationary pressures and support economic growth.
In summary, the global financial landscape is marked by mixed trends, with the U.S. experiencing a nuanced stock market movement, Europe grappling with interest rate speculations and economic slowdowns, and Asian markets like Japan and China navigating through stimulus measures and trade dynamics, reflecting the complex and varied nature of international economic conditions.
