Weekly markets round-up: Optimism high on interest rate cut hopes

The European Central Bank is pictured next to containers in Frankfurt
The European Central Bank is pictured next to containers in Frankfurt Copyright AP Photo
Copyright AP Photo
By Tina Teng
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Major European indices have notched up all-time highs, with the FTSE 100 reaching a fresh record following signals from the Bank of England (BoE) indicating an impending rate cut.


European stock markets are poised for a positive weekly close with the FTSE 100 repeatedly refreshing new highs, amid growing bets for central banks to cut interest rates this year. Globally, Wall Street is on track for a three-week winning streak due to a setback in the US government bond yields. Asian stocks are mostly higher, supported by China's encouraging economic performance.


On a weekly performance, the FTSE 100 rose by 2.56%, the Euro Stoxx 600 climbed 2.47%, the DAX advanced by 4.38%, and the CAC 40 added 3.45%.

The European stock market rally is broad-based, with all the sectors higher for the week. Sectors sensitive to interest rates, such as utilities and property, have shown particular strength following the BoE's indication of a potential rate cut in either June or August. The central bank maintained the interest rate at 5.35%, with a 7-2 vote among Monetary Policy Committee (MPC) members. Notably, one additional official voted for an immediate rate cut, compared to the previous meeting. BoE governor Andrew Bailey stated that a rate cut in June is neither "ruled out nor planned but hinted at the possibility of more rate cuts than expected this year. Money markets are now pricing a 50% likelihood for a rate cut in June and are fully pricing in a cut in August.

On the earnings front, UBS Group AG's stocks surged more than 8% following strong quarterly earnings results. The bank returned to profitability after two consecutive quarterly losses. Its key segment, Gold Wealth Management, generated revenue of $6.14 billion (€5.72 billion), up 28% from a year ago.

In contrast, BP's second-quarter net profit fell to $2.7 billion (€2.5 billion), down 46% year on year. The oil giant maintained the $3.5 billion (€3.3 billion) share buyback programme, aiming to bolster its market valuation.

Technology, industrial, and materials stocks all showed strength amid an improved macro environment. Shares of semiconductor equipment manufacturer ASML rose by 1.83%. SAP experienced gains for five consecutive trading days, with its shares increasing by 4.74% weekly. Airbus and Siemens saw their shares climb by 5% and 4.65%, respectively, over the past five days of trading. Similarly, Rio Tinto and Anglo American witnessed advances of 2.9% and 3.85%, respectively, during the same time frame.

In FX, both the eurodollar and the British pound faced upside pressure against the US dollar due to a slide in the US government bond yields.

Wall Street

The US stock markets are heading for a positive close for the week, with the Dow Jones Industrial Average up 1.84%, the S&P 500 rising 1.68%, and the Nasdaq climbing 1.18% on a weekly basis. Wall Street rebounded from the selloff in April as the Fed was less hawkish than expected, alongside indications of a softening US economy.

Over the past five trading days, 10 out of 11 sectors in the S&P 500 have shown gains, with utility leading the way with a 4.6% increase, followed by energy, rising by 3%, and materials, advancing by 2.8%. Consumer discretionary is the sole sector experiencing a slight decline. 

Among the "Magnificent Seven" stocks, most have seen gains during the same period: Apple is up by 6.67%, Meta Platforms has jumped by 7.64%, Nvidia has risen by 3.41%, Microsoft has climbed by 3.64%, Amazon has increased by 2.59%, and Alphabet has added 1.85%. However, Tesla stands as the only tech giant in the red, down by 4.47%

Company earnings are mixed. Over a five-day trading period, Disney's shares fell 6% due to soft guidance. The entertainment giant reported first-quarter earnings per share that beat market expectations but missed revenue estimates.

Reddit shares soared 11% on the reporting day. The social platform company topped revenue estimates and reported a less-than-expected loss for the first quarter. But its shares cut gains thereafter and are up more than 3% over the past five trading days.

ARM Holdings' shares fell 9% before cutting losses due to disappointing annual revenue guidance. However, the British chip designer's stocks are still up 41% year-to-date.

Asian Markets

Major Asian stock indices, including the Hang Seng Index, the ASX 200, and the Nikkei 225, have all experienced gains on a weekly basis.

Particularly noteworthy are the four consecutive weekly gains seen in Chinese stock markets, driven by optimism regarding the country's economic recovery and the pro-growth policies implemented by the Chinese government. Positive signals were further reinforced by China's April trade balance data, with exports increasing by 8.4% and imports rising by 1.5% year-on-year, following a slump in March.

In addition, the Reserve Bank of Australia (RBA) maintained the interest rate at 4.35%, unchanged from the previous level. However, the bank's slightly hawkish comment on the rate path tempered the weekly gains. Australia's largest bank, the Commonwealth Bank, witnessed a 2% decline in its shares following the third-quarter update, which revealed a 5% decrease in the bank's profit compared to the same quarter last year.

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