Amid rising Middle East tensions and persistent high U.S. interest rates, stock markets faced a third consecutive week of losses, impacting sectors from technology to retail and stirring global economic concerns.
What You Will Learn
- Learn about the factors leading to a third consecutive week of losses in global stock markets.
- Understand how U.S. retail sales figures and inflation rates are shaping monetary policies.
- Gain insights into the economic growth and challenges in key markets including the UK, China, and Japan.
Stock Market Struggles
Stock markets suffered their third straight week of losses amid concerns about Middle East tensions and the likelihood of U.S. interest rates staying higher for longer.
Big tech companies were among the hardest hit, with valuations in the space extremely sensitive to changing rate expectations.
The technology sector was further pressured by ASML, a key supplier in advanced chipmaking, which reported first-quarter revenues below expectations.
This dampened the outlook for firms generating income from artificial intelligence going into a big week of earnings announcements from big tech.
U.S. Economic Resilience
In economic news, robust figures from the U.S. Commerce Department indicated that retail sales in March surged by 0.7%, significantly exceeding the expected 0.3%, and up from a revised 0.9% increase in February.
This was partly driven by higher fuel prices, although the gains were widespread, including in sectors such as dining and online retail.
These strong economic indicators have led to concerns that the Federal Reserve might delay cutting interest rates until later in the year or even into 2025.
UK Inflation Trends
In the UK, consumer price inflation dropped to 3.2% in March, the lowest in two and a half years but slightly less than analysts had anticipated.
High prices in fuel and communications played a role in this modest decline. The closely watched services inflation rate slightly decreased to 6.0% from 6.1%.
China’s Economic Landscape
China reported a better-than-expected 5.3% economic growth for the first quarter of 2024, bolstered by a 6.1% increase in industrial output.
However, retail sales slowed in March and cement production dropped sharply, underscoring persistent challenges in the property sector.
Broad Stock Market Movements
U.S. stock indices fell by 3% over the week, with technology stocks particularly affected, dropping by 5.5% as investors re-adjusted their rate expectations.
European and UK markets also saw declines, although they were less affected by rate sensitivity, dropping just over 1%.
In contrast, Japanese stocks plunged by more than 6%, even as the yen hit a 30-year low against the dollar.
Chinese stocks, however, gained over 1.5% following the positive economic news.
Bond Market Developments
Yields of U.S. government bonds rose for the third week in a row as investors continued to rein in their expectations for near-term interest-rate cuts.
The yield of the 10-year U.S. Treasury bond closed at 4.61% on Friday with the 2- year bond finishing at 4.98%.
European Government bond yields also rose over the week as more broadly rate sensitive areas of the fixed income markets experienced the biggest moves.
Oil Market Fluctuations
Oil prices experienced volatility, with U.S. crude briefly topping $85 per barrel due to the tensions between Israel and Iran.
Prices fell back to around $83 by the end of the week, marking a decline of about 3%.
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