European Markets on a Winning Streak
European stock markets continued their upward trend this week, driven by optimism around potential interest rate cuts by the European Central Bank (ECB). Germany’s DAX index reached a new high after an unexpected decline in consumer prices for August. This marked the fourth consecutive week of gains for European stocks, with the Euro Stoxx 600, DAX, CAC 40, and FTSE 100 all posting solid advances.
Cooling Inflation Fuels Rate Cut Hopes
Lower-than-expected inflation data from Germany, which saw a decline to 2% year-on-year, and Spain’s inflation rate dropping to 2.2%, have fueled expectations that the upcoming Eurozone Consumer Price Index (CPI) will show a downward trend. These figures have strengthened the belief that the ECB may cut rates next month, with additional cuts expected in October and November. This optimism has positively impacted industrial and consumer stocks, pushing the Pan-European Stoxx 600 closer to a new high.
Mixed Performance on Wall Street
While European markets rallied, Wall Street had a mixed week. The Dow Jones Industrial Average rose by 0.39%, driven by gains in industrial stocks. However, the S&P 500 fell by 0.76%, and the Nasdaq Composite dropped by 2.02%, weighed down by a slump in technology shares after Nvidia’s earnings report disappointed investors. Despite beating earnings expectations, Nvidia’s revenue guidance fell short, causing a 6.38% drop in its stock on Thursday and a 5% decline for the week.
Currency Markets React to Rate Speculations
The growing anticipation of rate cuts has affected currency markets, with the euro and the British pound both losing ground against the US dollar. The EUR/USD fell for the second consecutive day, while the GBP/USD retreated after hitting a 29-month high earlier in the week. In contrast, the US economy showed stronger-than-expected growth, with a revised GDP of 3% for the second quarter, which dampened hopes for deeper rate cuts by the Federal Reserve.
Strong Gains in Asia-Pacific Markets
Meanwhile, Asia-Pacific markets saw strong weekly gains, with Japan’s Nikkei 225 rising by 0.6%, Australia’s ASX 200 up 0.7%, and China’s Hang Seng Index climbing nearly 3%. Chinese markets, in particular, showed robust performance in August, with the Hang Seng Index recovering 8% from a four-month low in July, supported by ongoing efforts to boost market sentiment. The global markets now await further economic data to gauge the future direction of monetary policy.
SOURCE: Ref Image from The Economic Times
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