In the past week, global markets experienced significant movements influenced by central bank policies and economic data. The U.S. saw a rally in stock indexes driven by anticipated interest rate cuts, while Europe received a boost from the Paris Olympics. Japan's market showed modest gains, and China remained cautious ahead of key economic announcements. Other key markets such as Turkey and Peru also had notable developments.
United States
- Investors celebrated the announcement of upcoming interest rate cuts by Federal Reserve Chair Jerome Powell.
- The Dow Jones Industrial Average and S&P 500 Index moved towards record highs, with small-caps outperforming large-caps.
- Trading activity was light, with some of the lowest daily trading volumes of the summer.
- Stocks jumped following Powell's speech at the Kansas City Fed’s annual economic symposium, hinting at a possible rate cut of 50 basis points in September.
- Minutes from the Fed’s previous policy meeting indicated that a "vast majority" of participants saw a September cut as "likely appropriate."
- Less-dovish commentary from some Fed officials later in the week caused markets to pull back slightly.
- Economic data mostly in line with expectations, with S&P Global's estimate confirming a slump in manufacturing but healthy growth in services.
- Existing home sales rose slightly, breaking a stretch of four monthly declines.
- The Labor Department’s annual revision showed 818,000 fewer jobs added over the previous 12 months than originally reported, sending bond yields lower.
Market Indexes Changes
- DJIA: 41,175.08 (+515.32, 9.25% YTD)
- S&P 500: 5,634.61 (+80.36, 18.13% YTD)
- Nasdaq Composite: 17,877.79 (+246.07, 19.10% YTD)
- S&P MidCap 400: 3,096.25 (+84.87, 11.31% YTD)
- Russell 2000: 2,218.70 (+76.78, 9.45% YTD)
Europe
- The pan-European STOXX Europe 600 Index ended 1.31% higher, buoyed by hopes of interest rate cuts by the Fed and ECB.
- Major stock indexes rose: Germany’s DAX (+1.70%), France’s CAC 40 (+1.71%), Italy’s FTSE MIB (+1.83%), and the UK’s FTSE 100 (+0.20%).
- Eurozone business activity picked up in August, driven by the Paris Olympics, but manufacturing continued to shrink.
- ECB reported a slowdown in wage growth, while Germany's economy showed signs of weakening.
- ECB policymakers indicated a stronger case for rate cuts in September, with potential for further cuts this year.
- Sweden’s Riksbank reduced its key policy rate by a quarter point to 3.5% and signaled more rate reductions ahead.
- UK business activity continued to expand, with the PMI reading at its highest since April.
Japan
- Japan’s stock markets made modest gains: Nikkei 225 (+0.8%) and TOPIX Index (+0.2%).
- BoJ Governor Kazuo Ueda reaffirmed the central bank's commitment to monetary policy normalization.
- Core consumer price inflation accelerated for the third straight month in July, supporting the BoJ’s hawkish stance.
- The yen strengthened against the USD, and the yield on the 10-year Japanese government bond rose to 0.90%.
China
- Chinese stocks fell due to a light economic calendar and caution ahead of Fed Chair Powell’s speech.
- Both the Shanghai Composite and CSI 300 Indexes recorded weekly declines, while the Hang Seng Index in Hong Kong advanced.
- China’s central bank kept its benchmark lending rates unchanged to protect bank profit margins.
- Baidu reported lower-than-expected second-quarter revenue despite beating earnings forecasts.
Other Key Markets
Turkey
- Turkey’s central bank kept its key interest rate unchanged at 50.0%.
- Policymakers expect the disinflation process to gain strength due to tight monetary conditions and other factors.
Peru
- Peru continues to experience political uncertainty but maintains healthy macroeconomic fundamentals.
- Despite political turmoil, responsible macroeconomic policies have remained largely intact.
- Recent populist measures passed by Congress could impact economic policymaking.
