Global Stock Market Review: Cooling Inflation and Economic Data Impact

 

Global Stock Market Weekly Analysis (18- 22 Dec 2023)

 

The global stock market indexes closed mixed this week. The economic data was in focus. Cooling inflation supported the markets in the US, UK, and Japan, while most of the European indexes, China, Hong Kong, and India closed in the red.

 

The US Stock Markets – Weekly Updates

 

The US stock market indexes continued their weekly winning streak. The indexes wrapped up an eighth positive week in a row, the first time for the S&P 500 index since 2017 and the Dow since 2019. The sentiments were positive as investors were more assured that the economy would avoid recession and the Federal Reserve would start reducing interest rates from early next year.

The week started on a strong note as San Francisco Fed President Mary Daly in an interview expressed that the short-term interest rates “will be quite restrictive even if we [cut the federal funds rate] three times next year.” She also highlighted that policymakers are cautious about slowing the economy too quickly, resulting in a sharp increase in unemployment.

On Friday, the Commerce Department showed that the core personal consumption expenditure (PCE) price index rose 0.1% in November, the same as the previous month, while annually it rose 3.2%, lower than the expectation of 3.3%. The 10-year U.S. Treasury yields fell below 4% and settled at 3.897% on Friday.

The other economic data released during the week came better than expected, as housing starts jumped in November. The CB Consumer confidence rose to its highest level since July. Though the manufacturing index was surprisingly down, the durable goods orders jumped in November above expectation.

 

European Stock Market Indexes- Weekly Updates

 

European stock market indexes mostly closed lower this week, France’s CAC, Germany’s DAX, and Italy’s FTSE MIB ended lower while the UK’s FTSE gained this week. The pan-European Stoxx 600 index closed slightly higher on a weekly basis and stayed near its 12-month high.

The UK’s retail inflation slowed more than expected in November due to a sharp drop in fuel, recreation, culture, and food. Meanwhile, the UK’s GDP revised lower from  0.2% to flat in the April-June period, the final estimates for the third quarter showed that the economy shrank 0.1%. Bank of England Deputy Governor Ben Broadbent said that despite this, the interest rates are likely to remain higher for some time.

Germany’s manufacturing sentiment fueled recession fears, as the Ifo Institute’s business climate index fell in December, and the order books continued to shrink. European Central Bank (ECB) policymakers continued to stress that inflation must stabilize below 3% to begin rate cuts.

 

Asian Stock Markets Updates

 

The major Asian stock market indexes closed mixed this week. Indian stock markets closed lower, snapping their seventh-week consecutive gain. The stock market indexes of Japan, South Korea, and Australia ended higher, while Hong Kong and China ended in the red. You can read about the Indian stock market weekly updates here.

 

Japan Stock Market

 

Japan’s Nikkei ended with modest gains during the week. The sentiments were upbeat due to the dovish BoJ policy and cooler inflation data. As widely expected, the Bank of Japan (BoJ) kept its ultra-loose policy unchanged in its final meeting of 2023. BoJ has not made any comments about possible policy tweaks in January next year, seeming to resist market predictions of a near-term interest rate hike.

On the economic front, the Data released later in the week showed that Japan’s core consumer price index rose 2.5% annually in November, down from the previous month’s 2.9% and the mildest inflation report since July 2022.

 

Chinese Stock Market

 

China’s Shanghai declined over the week after the government announced new restrictions on the gaming sector. Shanghai registered its sixth weekly decline, its longest losing streak since 2012, according to Bloomberg. As widely expected, the People’s Bank of China (PBoC) left their one- and five-year loan prime rates unchanged and kept its medium-term lending rate on hold the prior week.

In Hong Kong, the Hang Seng Index closed lower during the week.

 

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