Global markets presented a mixed picture after a broad rebound on Thursday, with major indices recovering from their recent lows. Investors likely sought dip-buying opportunities following the significant sell-offs earlier in the week.
Asian markets experienced a broad-based rally on Friday following the rebound on Wall Street. However, global benchmarks may end the week on a mixed note due to Monday’s sharp decline. Although sentiment has somewhat recovered, the significant swings in stocks suggest that volatility may not yet be over.
Europe
The market sell-offs were broad-based due to the prevailing risk-off sentiment earlier in the week. Most European stock markets remained in the red on a weekly basis, with the Euro Stoxx 600 falling by 2.65%, the CAC 40 sliding by 0.06%, and the FTSE 100 down by 0.36%, while the DAX rose by 0.11% over the past five trading days.
On the earnings front, the disappointing results from Europe’s largest company, Novo Nordisk, weighed on sentiment. Novo reported second-quarter earnings that missed analysts’ expectations and cut its profit outlook for 2024 due to intensifying competition in the weight-loss drug market, particularly from its US rival Eli Lilly. Shares of the Danish pharmaceutical firm fell by 5.68% over the past week. Conversely, Siemens shares rose by 2.09% following an earnings beat on Thursday, although the stock was down 4.69% weekly.
The broad sell-offs in semiconductor stocks continued this week, with shares of Europe’s largest tech company, ASML, down by 8.39% on a weekly basis. ASML’s stock has fallen 19% since it reported its second-quarter earnings in mid-July. Despite strong results, renewed chip export restrictions on China have hit global chipmakers’ shares, further intensifying sell-offs in technology stocks worldwide.
Luxury consumer stocks also extended their declines for the week, with LVMH down by 2.22%, Hermès sliding by 0.05%, Christian Dior falling by 3.06%, and Kering tumbling by 8.54% over a five-day trading period.
Notably, mining and banking stocks experienced significant downturns in the London stock markets. US recession fears caused a sharp decline in industrial metal prices, such as copper, while sliding government bond yields weakened profit outlooks for major banks. On a weekly basis, HSBC’s shares fell by 5.86%, Lloyds Banking Group’s shares were down by 2.23%, Barclays’ shares tumbled by 9.7%, Rio Tinto’s stocks slid by 3.49%, and Glencore’s shares slumped by 6.88%.
The euro remained resilient, being viewed as a haven currency amid the global market turmoil. The downward pressure on the US dollar also supported the single currency, with the EUR/USD exchange rate hovering around a one-month high, above 1.09.
Wall Street
The US stock markets rebounded sharply following better-than-expected job data on Thursday. However, the three major averages remained in the red for the week. The market rally may have been caused by dip-buys following the sharp selloff, driven by the US recessionary fears and the Japanese market turmoil.
Over the past five trading days, the Dow Jones Industrial Average fell 0.73%, the S&P 500 was down 0.51%, and the Nasdaq composite slid 0.70%.
At the sector level, nine out of eleven sectors were lower compared to a week ago, with materials and utilities leading the losses, down by 2.29% and 2.78%, respectively. industrial and technology were the only sectors that were higher, up by 0.89% and 0.65% respectively.
The “Magnificent Seven” stocks were mostly lower on a weekly performance, with Apple down 2.31%, Microsoft falling 3.46%, Nvidia sliding 3.88%, Alphabet declining 4.99%, Amazon tumbling 9.93%, and Tesla slipping 8.31%, while Meta Platforms’ shares were higher, up by 2.39%.
On major earnings, Novo Nordisk’s rival, Eli Lilly reported second-quarter earnings that blew expectations and raised its full-year outlook for 2024, thanks to surging sales in its weight loss injection Zepbound and diabetes drug Mounjaro.
Asia Pacific
Despite a rebound on Friday, stock markets across the Asia Pacific region are on course for a negative weekly close. The Nikkei 225 fell nearly 2%, the ASX 200 lost more than 2%, and the Hang Seng Index registered a slight decline for the week.
The surge in the Japanese Yen has eased over the past four trading days after reaching an 8-month high on Monday, indicating that investors have slowed the unwinding of carry trades in Yen pairs. This has also buoyed the US dollar against the Yen. The Bank of Japan’s meeting minutes revealed that policymakers discussed further rate hikes, signalling a hawkish shift that has contributed to market volatility.
Chinese stock markets rebounded sharply following better-than-expected inflation data for July, suggesting that the world’s second-largest economy is on a steady recovery path. The Hang Seng Index jumped 1.5% at 10 am local time, offsetting most of the early-week losses.
In contrast, Australian markets underperformed their Asian peers, as the Reserve Bank of Australia kept the policy rate unchanged for the seventh consecutive time. The relatively hawkish stance, combined with the global impact, weighed on regional stock market sentiment, with declines particularly evident in the major mining stocks.
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