USA
The U.S. stock market showed mixed results last week, with the S&P 500 down 0.96%, the NASDAQ up 0.16%, and the Dow Jones Industrial Average declining by 2.68%. Despite this, the market remained resilient, supported by strong economic data, though rising yields and geopolitical tensions weighed on sentiment. Key data from Thursday indicated lower-than-expected initial jobless claims, stronger durable goods orders, and robust consumer sentiment from the University of Michigan, reinforcing the U.S. economy's strength. These indicators suggest the Federal Reserve may maintain a hawkish stance, which led to downward pressure on gold and rising Treasury yields as rate cut expectations softened. Geopolitical events also influenced U.S. markets. On Saturday, Israel launched a symbolic retaliatory strike against Iran in response to an earlier rocket attack. The action, perceived as limited in scope, did not provoke an Iranian response, but the ongoing conflict added caution to global markets. Looking ahead, this week is set to be eventful, with the U.S. releasing labor data, consumer sentiment, GDP growth, and ISM manufacturing PMI, all of which could impact Federal Reserve policy expectations.
Europe
Major European indices closed the week in the red. The Stoxx 600 declined by 1.18%, the FTSE 100 by 1.31%, Germany’s DAX 40 by 0.99%, France’s CAC 40 by 1.52%, and Spain’s IBEX 35 by 0.95%. Manufacturing PMI for the Eurozone remained in contraction at 45.1, while services PMI held slightly above 50, indicating modest growth. European Central Bank (ECB) President Christine Lagarde expressed cautious optimism about inflation control, but there was no indication of imminent policy changes. Rising inflation in key economies, including Germany, and declining consumer demand weighed on equities, and political concerns around regional stability and energy prices further impacted investor sentiment.
Japan
Japanese markets also saw declines, with the Nikkei 225 down by 2.74% and the Topix index by 2.63%. Japan’s political landscape experienced a shift as the ruling coalition, led by the Liberal Democratic Party (LDP), lost ground in snap elections, securing only 209 seats (down from 279), falling short of the majority threshold of 233 seats. The opposition Constitutional Democratic Party of Japan (CDP) increased its presence to 143 seats, bringing potential changes to economic and fiscal policies. Markets reacted with caution, weakening the yen, as the USD/JPY exchange rate reached 153.7 amid concerns over political instability. On the economic front, Japan’s manufacturing PMI slightly declined to 49.8, signaling continued pressure in the manufacturing sector, though services PMI remained above 50. The Bank of Japan is expected to maintain its accommodative policy, particularly given the low inflation environment and potential policy shifts resulting from the political realignment.
China
The Chinese stock market experienced mixed performance, with the Shanghai Composite Index rising by 1.17% and the Hong Kong Hang Seng Index down by 1.03%. In an attempt to stimulate the economy, the People’s Bank of China (PBOC) lowered the one-year loan prime rate to 3.10%. This move aimed to support lending amid an economic slowdown marked by weak exports and ongoing property sector strains. While the rate cut offered short-term support, weak trade data continued to weigh on investor confidence. Geopolitical tensions with the U.S. and a cautious global outlook kept pressure on Chinese equities, dampening the effectiveness of the PBOC’s intervention.