Wall Street Drops, London Holds, Asian-Pacific in Between as Inflation Affects Market
Inflation and geopolitical tensions collided on Wall Street last week, sending shockwaves through the markets and leaving investors on edge.
As the closing bell rang on Friday, the Dow Jones Industrial Average had tumbled 475.84 points, marking a 1.24 per cent decline, while the S&P 500 suffered its worst day since January, plummeting 1.46 per cent. The Nasdaq Composite also felt the heat, pulling back by 1.62 per cent.
Throughout the week, major bank shares bore the brunt of the selling pressure, contributing to the market’s downward spiral.
…Dow Jones plummets 475 points, S&P 500 suffers worst day since January
JPMorgan Chase, one of the nation’s largest banking institutions, saw its shares take a nosedive, plunging more than 6 per cent following the release of its first-quarter results. Jamie Dimon, the bank’s CEO, sounded the alarm on inflationary pressures, warning of potential economic headwinds ahead, CNBC reported.
Wells Fargo and Citigroup also faced headwinds, with their stocks slipping despite mixed earnings reports.
Meanwhile, geopolitical tensions in the Middle East added fuel to the fire. Reports of escalating tensions between Israel and Iran rattled markets, pushing oil prices higher. U.S. crude settled at $85.66 a barrel, stoking fears of increased inflationary pressures.
Furthermore, consumer sentiment echoed investor concerns, with the University of Michigan’s Surveys of Consumers reporting a dip in the consumer sentiment index for April. Frustrations over persistent inflationary pressures weighed on consumers, as year-ahead and long-run inflation expectations ticked up.
Despite overnight gains in the tech sector, the broader market ended the week in the red. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all notched weekly losses, reflecting the heightened volatility and uncertainty gripping the markets.
While tech giants like Nvidia, Amazon, and Alphabet saw gains, buoyed by positive news and strong performance, the broader market struggled to find its footing. Apple, in particular, stood out with a significant jump following reports of its transition to artificial intelligence-focused chips for its Mac product line.
As the trading week drew to a close, investors braced themselves for continued volatility and uncertainty in the days ahead. With inflationary pressures and geopolitical tensions looming large, the path forward remains fraught with challenges for both Wall Street and Main Street alike.
Europe’s market performance: London’s FTSE 100 defies market odds
In Europe, despite a backdrop of falling equities in New York and Europe, the FTSE 100 rallied unexpectedly on Friday, edging closer to its all-time high. The surge, led by the mining and oil sectors, defied concerns over escalating tensions and apprehensions about US interest rates.
The FTSE 100 index closed at 7,995.58, marking a robust gain of 71.78 points or 0.91 per cent. Although it narrowly missed breaching the coveted 8,000-point threshold, its resilience stood out amidst global market turbulence.
Meanwhile, the FTSE 250 dipped by 65.63 points, a marginal 0.3 per cent decrease, settling at 19,721.24. Additionally, the AIM All-Share experienced a slight setback, dropping 2.92 points or 0.4 per cent to 755.91.
In parallel with London’s unexpected rally, European markets experienced mixed fortunes. The CAC 40 in Paris recorded a modest decline of 0.2 per cent, while the DAX 40 in Frankfurt fell marginally by 0.1 per cent. This divergence highlighted London’s resilience amidst broader market uncertainties.
Asia-Pacific markets react to economic data
In the Asia-Pacific markets, investors were met with a mixed bag of results. China’s benchmark Shanghai Composite Index (000001.SH) experienced a downturn, losing 0.49 per cent on the day, while the Shenzhen Component Index (399001.SZ) followed suit with a 0.78 per cent decrease.
The tech-heavy STAR 50 Index (000688.SH) in Shanghai managed to end the day nearly flat, contrasting with Shenzhen’s ChiNext Index (399006.SZ), which fell by 1.08 per cent.
Japan’s Nikkei 225 Index saw a modest increase of 0.21 per cent to 39,523.55, while the broader Topix rose 0.46 per cent to 2,759.64. The yen continued to weaken against the dollar, hitting as low as 153.29.
Meanwhile, Hong Kong’s Hang Seng index led the region’s losses, tumbling about 2 per cent. Mainland China’s CSI 300 also experienced a decline, falling 0.81 per cent to close at 3,475.84.
The downturn in these markets coincided with China’s exports for March, which fell more than expected, declining 7.5 per cent compared to the 2.3 per cent fall forecasted by economists. This followed a weaker-than-expected rise in the country’s inflation the previous day.
Singapore, however, showed resilience as its first-quarter gross domestic product climbed 2.7 per cent year-on-year, surpassing the 2.2 per cent growth recorded in the last quarter of 2023. The city-state’s central bank kept its monetary policy steady, maintaining the width and level of its policy band unchanged. Unlike other countries, Singapore utilizes exchange rate settings for its monetary policy, rather than a benchmark interest rate.
South Korea’s March unemployment rate rose to 2.8 per cent, leading to a slight decline in the country’s benchmark Kospi index, which slid 0.93 per cent. However, the small-cap Kosdaq managed to gain 0.28 per cent after South Korea’s central bank kept policy rates unchanged at 3.5 per cent, a 15-year high.
In Australia, the S&P/ASX 200 slipped 0.33 per cent, extending losses from the previous day and closing at 7,788.1.
Furthermore, China’s exports fell significantly short of expectations in March, recording a 7.5 per cent decline year-on-year, compared to the 2.3 per cent decline expected by economists. Total trade in the world’s second-largest economy also slid 5.1 per cent year-on-year to $500.8 billion. China’s trade surplus shrank more than expected to $58.55 billion, compared to the $70.2 billion expected in the Reuters poll.
Meanwhile, the Japanese yen continued to weaken against the U.S. dollar, setting a new 34-year low of 153.29. Japanese officials reiterated their concerns about the yen, with Finance Minister Shunichi Suzuki stating that authorities were analyzing the factors driving the yen’s decline and standing ready to respond to any excessive currency swings.
The Asia-Pacific markets continue to navigate through economic uncertainties, with investors closely monitoring the impact of these developments on the region’s economies and financial markets.
