Global stock markets had a difficult week, with technology stocks in particular giving up some of their recent gains.
Companies involved in the manufacture and distribution of microchips needed to power artificial intelligence systems have been hit by an escalation of the trade war between the United States and China. Concerns were further increased by comments later in the week from Republican presidential candidate, Donald Trump, suggesting the US should not be expected to defend Taiwan against Chinese aggression – with Taiwan being home to one of the world’s most important semiconductor producers.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.7% up for the week so far, with the S&P 500 falling 1.3%. The Dow was one of the only bright spots this week, with the index reaching a record high on Wednesday as investors rotated out of growth companies into more defensive sectors. Small-cap stocks in the US continued to gain as hopes rose of a Federal Reserve interest rate cut in September, with Fed chair, Jerome Powell, commenting that policymakers need not wait until inflation falls to its 2% target to act. Economic data in the US remains strong, with retail sales up in June alongside a larger-than-expected rise in industrial production.
UK
In the UK, the FTSE 100 closed on Thursday 0.6% down for the week so far after falls in commodity prices and a rise in the value of sterling hit large-cap stocks in London. Figures for June showed the rate of inflation in Britain had remained at 2% despite analysts’ expectations it would fall further. Prices in the services sector continue to rise at a rapid rate, with higher costs in the hotels and restaurants sector primarily to blame. Shares in the UK’s water companies fell after the regulator announced it would take action following a string of sewage scandals, while investors welcomed the new government’s plans to promote growth by supporting construction and infrastructure projects.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 2.1% for the week, while France’s CAC 40 fell 1.8%. Further political deadlock in France prolonged the uncertainty for the country’s investors, while morale among their German counterparts was reported to have fallen for the first time in 12 months. The European Central Bank kept interest rates unchanged at its Thursday meeting, but ECB President, Christine Lagarde, warned of potential risks to eurozone growth in the months ahead. Inflation in the bloc fell slightly to 2.5% in June, remaining stubbornly above the bank’s 2% target.
Asia
In Asia, the Hang Seng index in Hong Kong fell 2.8% after second-quarter data showed the Chinese economy was growing more slowly than expected. Weakness in the property sector continued to drag on activity, while retail sales also underperformed. Japan’s Nikkei 225 index of leading shares, meanwhile, declined 2.6% largely as a result of concerns in the semiconductor sector. US officials this week threatened to take action against foreigncompanies that they deem to be sharing important details of microchip production with firms in China.
July 12 | July 18 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8252.9 | 8204.9 | -0.6 |
FTSE 250 | 21202.9 | 21234.2 | 0.1 |
S&P 500 | 5615.4 | 5544.6 | -1.3 |
Dow Jones | 40000.9 | 40665.0 | 1.7 |
DAX | 18748.2 | 18354.8 | -2.1 |
CAC 40 | 7724.3 | 7586.6 | -1.8 |
ACWI | 828.6 | 817.5 | -1.3 |
Hong Kong Hang Seng | 18293.4 | 17778.4 | -2.8 |
Nikkei 225 | 41190.7 | 40126.4 | -2.6 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 18 July 2024.
