Major global stock indices are heading towards a negative weekly close as concerns about "higher-for-longer" interest rates weigh on market sentiment.
ADVERTISEMENTRisk-off is currently dominating global market sentiment, leading equities to lose their upward momentum. Concurrently, metal prices, including gold, silver, and copper, have sharply retreated from their all-time highs. The US dollar has strengthened, putting pressure on other G-10 currencies. This development follows the release of the Federal Reserve's meeting minutes, which revealed a lack of confidence among board members regarding the potential for lowering interest rates.
Europe
European stock markets are poised to close lower for the week as sentiment sours amid uncertainties about central banks’ interest rate trajectories. The United Kingdom reported a Consumer Price Index (CPI) reading that was hotter than expected, raising concerns about whether the Bank of England will commence a rate cut in June.
Over the five-day trading period, the FTSE 100 fell by 1.18%, the Euro Stoxx 600 was down 0.2%, the DAX slipped 0.28%, and the CAC 40 slid 1.05%.
Energy and luxury goods stocks dragged on the broad market, while the tech sector and drugmaker stocks outperformed. This sector rotation mirrored Wall Street’s performance: sliding crude prices pressured oil producers' stocks, while Nvidia’s strong quarterly earnings buoyed the tech sector.
On a weekly basis, Shell Plc.’s shares fell by 2.69%, BP’s stocks slid 1.4%, and Totalenergies’ shares declined by 2.75%. Luxury consumer stocks such as LVMH and Hermes also slumped, both experiencing drops of more than 4%. Conversely, Novo Nordisk’s stocks rose by 2.8%, AstraZeneca shares were up by 1.8%, SAP SE’s shares climbed by 1.84%, and ASML’s stocks advanced by 1.44%
Mining stocks saw mixed performance, with Anglo-American's shares slightly higher, up by 0.28% for the week, following the British miner's rejection of BHP’s takeover offer for the third time. BHP increased the offer price to £29.34 per share, valuing the company at £38.6 billion, according to Reuters.
On the economic front, the flash manufacturing and services PMIs presented a mixed picture in major European countries in May. Germany exhibited further improvement in its economic activities, while the services sector in France reverted to contraction after a one-month expansion in April. However, the overall Eurozone manufacturing PMI remained in contraction for the 15th consecutive month in April. Meanwhile, according to the flash data, both manufacturing and services PMIs expanded in the UK in April.
In currencies, both the Euro and the British pound weakened against the US dollar. This is attributed to a more hawkish stance held by the Federal Reserve compared to the European Central Bank (ECB) and the Bank of England (BoE). Markets are pricing in the possibility of a sooner rate cut by the two European central banks than by the Fed.
Wall Street
The Wall Street rally has also lost steam due to Fed officials’ reluctance to consider rate cuts, despite Nvidia’s strong quarterly earnings.
Over the past five trading days, the Dow Jones Industrial Average slumped by 2.35%, the S&P 500 was down by 0.67%, and the Nasdaq rose by 0.3%.
At a sector level, technology was the sole sector that was higher over a five-day trading period, up by 0.4%. Real estate and energy were the biggest laggards, down by 3.49% and 3%, respectively, due to growing concerns about a “higher-for-longer” interest rate environment.
The magnificent seven stocks showed a mixed performance for the week, with Microsoft’s shares up by 1.43% and Nvidia’s stocks jumping by 10%. However, shares of Apple, Alphabet, Amazon, Meta Platforms, and Tesla were all down, ranging between 0.2% and 1%.
The AI powerhouse, Nvidia, surpassed earnings expectations with annual revenue surging an impressive 262% in its first quarter of fiscal year 2025. Following this stellar performance, the chipmaker’s shares soared by more than 9% on Thursday, surpassing the $1,000 mark for the first time. Additionally, the company has announced a 10-for-1 stock split, scheduled to commence trading on 10 June.
The US dollar strengthened due to the rising US bond yields after the Fed meeting minutes suggested that a rate cut may not occur as soon as previously projected. A strong dollar exerts pressure on commodity prices in general, potentially prompting profit-taking moments in precious metals such as gold and silver, as well as industrial metals like copper.
Asian Markets
Most Asian indices are in the red this week, with signs of a renewed trade war between the US and China sparking risk-off sentiment and sending Chinese stock markets lower. The Chinese benchmark index, the Hang Seng Index, slumped by 3.5%, and the Japanese index, the Nikkei 225, is down 0.35% over the past five trading days.
The Australian stock market benchmark, the ASX 200, fell by 0.48% during the last five trading days, with the consumer discretionary and telecommunications services sectors leading losses, both down by more than 3%. However, the information technology sector outperformed, rising by 3.3%. BHP’s shares slumped nearly 3% on Thursday following Anglo-American’s rejection of the takeover offer. Despite this, the world’s largest miner’s stocks remained flat for the week.
