Global Stock Market Weekly Update: US and Japan Lead, Others Lag Behind
Global Stock Market Weekly Analysis ( 15 – 19 Jan 2024)
Global stock market indexes ended mixed during the week that ended 19 January. The stock market indexes of the US and Japan closed higher, while European and other Asian stock market indexes including India, China, Hong Kong, and Kospi closed in the red during the week.
The US Stock Markets – Weekly Updates
The US stocks closed higher during the truncated week. Stock markets were closed last Monday on account of the Martin Luther King, Jr., holiday. The market focused on growth stocks, as technology stocks outperformed. A rally in Apple stocks was witnessed after Bank of America upgraded it to buy and set a higher target price. Chip-related stocks were in demand, Artificial Intelligence (AI) stocks NVidia and AMD gained the most and lifted the Nasdaq index.
Fourth-quarter earnings just kicked off with banking and financial stocks. Banking stocks reported mixed earnings during the week. Boeing fell sharply after the company reported earnings and following downgrade warnings by the analyst related to the safety issue, however, stocks recovered later during the week.
Economic Data
The economic data released during the week show that manufacturing activity in the New York region reached its lowest level since early 2020. Even in the US mid-Atlantic region, the manufacturing activity improved less than expected in January and recorded in negative territory.
The latest data showed on Wednesday, that retail sales jumped in December as online sales hit a new record high. On Friday, Michigan’s consumer sentiment index came higher than expected in January, indicating that consumers are becoming more confident about the economy and inflation.
Expectation of Early Rate Cut
Expectations for early rate cuts in 2024 fell sharply over the week after the retail sales data and comments from the Fed officials. Fed Governor Christopher Waller’s comment “I see no reason to move as quickly or cut as rapidly as in the past” dented the market sentiments.
Waller’s comments faded the early rate cut hopes and this spiked the Treasury yields. The 10-year Treasury yield climbed to 4.131% after hitting a high of 4.199% on Friday, last week’s closing of 3.944%. According to the CME FedWatch Tool, the chances of a rate cut in March fell from 81.0% to 47.4% during the week.
European Stock Market Indexes- Weekly Updates
European stock markets closed lower, the pan-European Stoxx 600 index ended lower by 1.58% in the week. The central bank policymaker’s hawkish comments from Davos regarding early interest rate cuts dented the market sentiments. The major European stock market indexes, CAC, DAX, FTSE MIB, and the UK’s FTSE 100 all ended in the red.
At Davos, the World Economic Forum, ECB President Christine Lagarde indicated that “likely” that interest rates would be cut in summer, not spring as the investors expected. She also said that the ECB would have crucial information on wages which would influence a policy decision by “late spring.”
Economic Data from Germany and the UK
The German economy shrank 0.3% in the December end quarter of 2023, according to a preliminary estimate, but was slightly higher than the previous quarter and avoided the technical definition of a recession. However, gross domestic product is estimated to have shrunk by 0.3% during the year 2023.
The UK’s inflation rose unexpectedly in December due to higher tobacco prices- the first increase in 10 months. However, retail sales numbers came much weaker than expected in December, falling 3.2% sequentially for their biggest monthly drop since January 2021.
Asian Stock Markets Updates
The Asian stock market indexes closed mostly lower during the week. Indian stock markets also ended in the red during the week, you can read the Indian stock market weekly report here. The stock market indexes of China, Hong Kong, Australia, and South Korea closed in the red, while Japan ended higher this week.
Stock Market Index- Japan
Japan’s stock markets gained during the week, Nikkei reached a 34-year high this week as weakness in the yen supported the exporters. The ease in inflationary pressure also avoided any shift in the central bank’s monetary policy stance scheduled next week.
The potential of a negative rate policy in the near term had already been subsidized due to the economic impact of the deadly earthquake that struck Japan’s Noto Peninsula on New Year’s Day.
Stock Market Index- China
China’s stock market index fell during the week, as China’s gross domestic product growth record at 5.2% in the fourth quarter, compared to the same period last year and for the full year of 2023, came slightly below the market expectation. However, the GDP number came in line with Beijing’s official annual growth target.
However, other data released during the week showed some weakness in China’s economy. Retail sales rose lower a expected in December compared to last year, down from November’s increase. Meanwhile, Fixed-asset investment grew above estimates for the full year amid higher infrastructure growth, but a decline in real estate investment deepened.
Industrial production rose more than expected in December against the prior year, while urban unemployment came slightly higher by 5.1% from November’s 5.0%. The youth jobless rate was 14.9% in December as against a record high of 21.3% in June.
The People’s Bank of China (PBOC) injected an above-forecast RMB 995 billion into the banking system via its medium-term lending facility but kept the lending rate as it is, disappointing investors.
In Hong Kong, the Hang Seng Index closed sharply lower during the week following the weakness in the global markets.
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You may also like to read, US Markets: Dow Jones, S&P 500 and Nasdaq Composite Index, 19 Jan 2024
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