European Stocks Enjoy Some Respite

  • Market Overview

Following two consecutive days of declines, European equities ended Thursday's trading session marginally higher, driven by Nvidia's (NASDAQ: NVDA ) impressive earnings announcement and solid economic data from the Eurozone. The pan-European STOXX 600 closed slightly above the flatline at 521, while the Eurozone's STOXX 50 gained 0.20% to settle at 5 035. Flash PMIs for May indicated stronger-than-expected private sector activity in the Eurozone, boosting expectations for continued economic growth despite the European Central Bank's prolonged period of rising interest rates.

Wall Street closed lower on Thursday, as hotter-than-expected PMI data raised concerns about prolonged interest rate hikes. The Dow Jones fell by 605 points, its lowest day of the year. Similarly, the S&P 500 and Nasdaq Composite fell from their record highs, closing 0.70% and 0.40% lower. The flash S&P Global PMIs exceeded forecasts, showing a pick-up in US business activity. This, combined with sustained inflation, fuelled anticipation that the Federal Reserve (Fed) would maintain its present interest rate policy, sending Treasury yields up. After nearing 105 on Wednesday, the dollar index retreated to 104.7 on Thursday as investors assessed the outlook for monetary policy.

Asian shares traded in mixed fashion on Thursday, with the Shanghai Composite falling 1.33% to close at 3 116 points while the Shenzhen Component dropped 1.56% to 9 542, hitting their lowest levels in over three weeks amid a broad share market decline. Japan’s benchmark Nikkei 225 rose by 1.10% to 39 054.81, while Hong Kong’s Hang Seng fell by 1.30% to 18 942.77. These movements came as the latest US Federal Open Market Committee (FOMC) meeting minutes indicated participants' concerns about lingering inflation, dampening enthusiasm for interest rate cuts. The minutes also showed that some members were inclined to tighten policy even further should inflation continue to rise. Furthermore, geopolitical tensions weighed on market sentiment after China's military began two days of "punishment" drills in five locations surrounding Taiwan in reaction to "separatist acts."

The FTSE/JSE All Share Index continued its decline, shedding nearly 0.70% of its value to settle at 78 956 points, marking its lowest level in over a week. Market sentiment was influenced by fresh US economic data suggesting a prolonged period of elevated interest rates, along with hawkish FOMC meeting minutes. However, Nvidia's impressive performance reassured investors, helping stabilise the market.

Oil prices slipped on Thursday, with Brent crude closer to $82 per barrel, hovering near its lowest point in three months, driven by concerns over demand and rising US stockpiles. Gold prices dipped below $2 340 per ounce on the same day, marking a two-week low and extending their downward trend for the third consecutive session according to Trading Economics at 22h00.

PSG Wealth Daily Investment Update, 24 May 2024

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