The Australian market saw a significant boost last week, with the ASX 200 surging by 2.1%, marking its best performance since December. This rally was largely driven by the banking sector, which reached new record highs, and strong performances in Financials and Consumer Staples sectors. Despite this upbeat market movement, the economic backdrop revealed some challenges. Australia’s GDP growth slowed to just 0.1% for the quarter, missing economists’ forecasts and marking the weakest annual result outside the pandemic since 1992. This slowdown, coupled with elevated interest rates and cost of living pressures, may increase pressure on the Reserve Bank of Australia to consider easing rates after holding them steady at 4.35% for four consecutive meetings.
In the United States, the markets ended the week on a positive note with the Nasdaq, Dow Jones, and S&P 500 all posting gains. The labour market showed unexpected strength with nonfarm payrolls rising by 272,000 and wages increasing by 0.4% from April, both exceeding estimates. However, the unemployment rate edged up to 4.0%. AI continues to be a major driver of the equity rally, with Nvidia’s market capitalisation briefly surpassing Apple’s, making it the second largest company globally. The “AI Big Ten,” including tech giants like Alphabet, Microsoft, and Meta, now constitutes 28% of the S&P 500 by weighting, illustrating the significant influence of AI on the market.
European markets also experienced notable movements. The European Central Bank (ECB) cut rates by 25 basis points for the first time since September 2019, while updating its inflation forecasts for 2024 and 2025 to higher levels. The Euro Stoxx 50 and Euro Stoxx 600 both posted gains, although the FTSE ended the week slightly down.
In Asia, market reactions were mixed. The Hang Seng in Hong Kong gained 1.6% after a period of profit-taking, while the Shanghai Composite fell by 1.2%. Japan’s Nikkei saw a modest rise, bolstered by positive household spending data, although the country’s economic indicators showed some signs of slowing growth. Investors globally are now looking ahead to policy meetings from major central banks for further direction.
Published 11/6/2024
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