Global markets remained resilient throughout the week due to heightened expectations that central banks would commit to interest rate cuts. Monthly inflation in the United States was cooler than anticipated, while European markets rebounded amid easing political concerns.
ADVERTISEMENTMajor global benchmarks are likely to end the week higher amid strengthening rate-cut expectations by central banks. Political uncertainties diminished, with European stock markets paring early losses following the second round of the French election. Wall Street extended its bullish momentum before retreating on Thursday after the country reported cooler-than-expected inflation data. Most equity markets in Asia also ended higher for the week. Additionally, precious metal prices saw sharp rebounds due to a softened US dollar, with gold and silver prices resurging toward their all-time highs.
Europe
Despite an initial drop across the European stock market, most benchmarks rebounded and may be set for a positive close for the week. In France, neither party is likely to gain an absolute majority, leading to a possible hung parliament. This could be beneficial for market sentiment, as neither the far-right nor the left-wing coalitions can easily impose their spending plans. In the UK, the landslide Labour Party win provided a sense of stability, fuelling market optimism and pushing the pound to a one-year high.
On a weekly performance basis, the Euro Stoxx 600 rose 0.29%, the CAC 40 fell 0.63%, the DAX climbed 0.35%, and the FTSE 100 was up 0.24%. While luxury consumer stocks showed resilient movements, green energy and banking stocks remained under pressure in the French markets due to political uncertainties. Over the past five trading days, LVMH slid 1.36%, Hermès was down 0.61%, TotalEnergies slumped 3.23%, and BNP Paribas fell 2.33%.
A notable trend is that UK construction-related stocks were buoyed by the election outcome, as the Labour Party called for an increase in housing supply. Unilever Plc’s shares were up 3.02%, and National Grid’s stocks jumped 4.40% from last week.
However, BP’s stocks slumped after the oil and gas producer warned of up to $2 billion of impairment charges in the second-quarter trading update. Shares of big miners fell early in the week before paring losses as a softened US dollar lifted metal prices. Rio Tinto was down 2.11% and Glencore Plc fell 0.67% over the past five trading days.
Both the euro and the British Pound strengthened against the US dollar for the third consecutive week due to a softened greenback following the cooler-than-expected US inflation data. Optimism towards the UK election outcome has also lifted the Pound.
Wall Street
Wall Street saw a sharp retreat in major technology stocks following the release of the Consumer Price Index (CPI) for June on Thursday. Despite the pullback, the three major benchmark indices are likely to finish the week in the green, with the Dow Jones Industrial Average up 0.96%, the S&P 500 rising 0.31%, and the Nasdaq falling 0.35% over a five day trading period.
Profit-taking might have caused the decline in tech giant shares due to funds rotating into small-cap stocks, with the Russell 2000 jumping 5% over the past five trading days. The US June headline CPI came in at 3% year on year, down from 3.3% the previous month and cooler than the estimated 3.2%. The core CPI increased 3.3% year on year, the lowest since April 2021. This data significantly strengthened expectations for the Fed to reduce the interest rate, with the probability of a 25 basis point cut rising to 83.4% from 70% in one day.
At a sector level, nine out of eleven sectors posted gains from a week ago, with the rate-sensitive sectors—real estate and utilities—leading the charge, up 3.8% and 3.36% respectively. The technology and energy sectors underperformed, down 0.44% and 0.88% respectively.
Selling pressure emerged in blue chips, with Microsoft down 1.32%, Nvidia sliding 0.69%, Amazon falling 1.28%, and Tesla slumping 2.17% over the last five trading days. Apple outperformed the Magnificent Seven group stocks, up 2.72% during the same time frame, while Meta Platforms is slightly up by 0.54%.
The US enters the second-quarter earnings season, with major banks, including JPMorgan Chase, Citigroup, and Wells Fargo reporting earnings today.
Asia Pacific
Most stock markets across the Asia Pacific are set for the second straight weekly gains. The Australian benchmark, the ASX 200 notched a new high of 7, 965 at 12 pm local time, buoyed by the global risk-on sentiment. Its Big Four banking stocks led the charge, with the biggest lender, the Commonwealth Bank’s shares up 3.6% this week.
The Japanese Yen strengthened sharply following the US CPI data. Traders expected the Bank of Japan to intervene in the exchange rate after the Yen reached a fresh 38-year low, while the Fed may be poised to cut the interest rate as soon as September. The Yen firmed 1.8% against the US dollar on Thursday. The Japanese stock markets surged to a fresh high before cutting gains.
Chinese stock markets saw a surge after the government announced measures to curb short selling. Amid ongoing stimulus policies imposed by Beijing and the upcoming Third Plenum meeting, optimism rose and buoyed the regional markets. The Hang Seng Index jumped nearly 1% at the open on Friday.
