Global stock markets rallied on growing expectations of rate cuts by central banks. However, the momentum eased as investors grew cautious ahead of the Jackson Hole Symposium, which gets underway in the US today.
Major global benchmarks are likely to extend their third consecutive weekly gains, as both the European Central Bank (ECB) and the Federal Reserve (Fed) are expected to deliver rate cuts in September.
However, sentiment soured somewhat towards the end of the week, with Wall Street retreating on Thursday ahead of the Jackson Hole Symposium, which is attended by central bankers and other key financial figures.
In commodities, gold prices reached a new high due to increasing bets on a rate cut by the Federal Reserve, while oil markets experienced a sharp decline amid easing Middle East tensions and tepid economic data from China.
Europe
European stock markets extended a broad rally this week, with the Euro Stoxx 600 up by 0.82%, the CAC 40 rising by 1%, and the DAX advancing by 0.93% over the past five trading days. However, the British benchmark, the FTSE 100, lost momentum, declining by 0.28%, dragged down by mining stocks.
Consumer stocks led the gains in the Euro Stoxx 600, with LVMH rising by 5.23%, Hermès advancing by 5.87%, L’Oréal up by 2.95%, and Christian Dior up by 4.33% from last week.
However, the energy sector underperformed due to a slump in crude oil prices, with TotalEnergies down by 0.42%, Shell slumping by 3.03%, and BP falling by 2.89% over the five-day trading period.
The European Central Bank (ECB) meeting minutes revealed that the bank is keeping the door open for a rate cut in September, without providing a clear rate path. The bank indicated that the short-term outlook for economic growth has deteriorated, while inflationary pressures in the services sector were persistent.
On the economic front, preliminary data suggests that the Eurozone’s manufacturing activity remained contracted in August.
However, the services Purchasing Managers’ Index (PMI) expanded significantly, particularly in France, driven by the Paris Olympics. As a result, business activity in the Eurozone showed signs of acceleration, while easing wage growth is likely to encourage the ECB to implement a second rate cut in September.
In the UK, the August PMIs for both manufacturing and services sectors continued to expand, according to preliminary data from S&P Global. This suggests that the country’s economy remains robust in the third quarter, following a 0.6% growth rate in the previous quarter, reported last week.
Both the euro and the pound continued to surge against the US dollar, reaching their highest levels since July 2023. This was largely due to a decline in the greenback after the Federal Reserve’s meeting minutes indicated that the bank would begin reducing its interest rate in September.
Wall Street
The US stock markets trimmed some early-week gains by Thursday. The three major indices are set to end the week mixed as investors grew cautious ahead of the Jackson Hole event. Federal Reserve Chair Jerome Powell is expected to provide guidance on the rate path, with a September rate cut increasingly seen as a certainty.
Over the past five trading days, the Dow Jones Industrial Average rose by 0.13%, the S&P 500 gained 0.29%, while the Nasdaq Composite fell by 0.07%. Notably, the fear gauge, the Volatility Index (VIX), surged by 19% from last week, indicating a re-emergence of risk-off sentiment.
At the sector level, 10 out of the 11 sectors posted weekly gains, with Consumer Discretionary and Consumer Staples leading the way, up by 1.94% and 1.65%, respectively.
The strong performance in consumer stocks was primarily driven by robust earnings results from major retailers like Walmart and Target. Conversely, the energy sector was the largest laggard, down by 1.53% over the past five trading days, impacted by the sharp decline in crude oil prices.
Most of the Magnificent Seven stocks ended the week lower, as the sell-off in technology shares appeared to resume amid profit-taking and renewed risk-off sentiment on Thursday. Microsoft, Meta Platforms, and Tesla each declined by more than 1%, while Alphabet and Nvidia saw slight gains over the five-day period. Apple and Amazon remained flat weekly.
Asia Pacific
Following last week’s rally, major benchmarks across Asia recorded slight gains for the week. Japan’s Nikkei 225, Australia’s ASX 200, and China’s Hang Seng Index all rose by less than 1% on a weekly basis.
Meanwhile, the Chinese mainland benchmarks ended the week on a negative note, with sell-offs particularly affecting major technology stocks such as Baidu and JD.com. The decline may have been primarily driven by an outflow of foreign funds amid concerns over China’s economic outlook and corporate earnings.
