This week saw Australian equities end in the red, with the ASX 200 down by 0.4%. The rise in monthly CPI to 4% in May, up from 3.6% in April, indicates little progress towards the Reserve Bank of Australia’s (RBA) target of 2-3% for the first half of 2024. This raises questions about the RBA’s next steps. The central bank has become slightly more hawkish recently due to the lack of progress in returning inflation to target and is closely watching the upcoming Q2 CPI data, expected before their August meeting. In the Australian market, Technology (+2.7%) and Energy (+0.9%) sectors were the top performers, while Real Estate (-3.5%), Discretionary (-1.3%), and Materials (-0.8%) saw the most significant declines.
Across the Pacific, US markets had a relatively flat week, with the Nasdaq inching up by 0.2%, while both the Dow Jones and S&P 500 dipped by 0.1%. Despite these minor movements, the markets have shown resilience, closing the first half of 2024 with notable gains. The Nasdaq, Dow Jones, and S&P 500 are up by 18.1%, 3.8%, and 14.5%, respectively. Meanwhile, recent macroeconomic data revealed softening inflation, supporting expectations of potential rate cuts by the Federal Reserve later this year.
In Europe, most indices also ended the week in the red, with the Euro Stoxx 50, Euro Stoxx 600, and FTSE down by 0.3%, 0.7%, and 0.9% respectively. Investors are cautious, particularly with significant redemptions from European equity funds ahead of France’s legislative elections. On a brighter note, the European Central Bank (ECB) is gaining confidence that inflation will return to its 2% target next year, based on June’s disinflation data from France. This optimism has led the ECB to consider cutting interest rates from their current record highs.
Looking at the Asia-Pacific region, the Hang Seng and Shanghai Composite indices both declined, driven by underperformance in technology stocks and concerns over falling foreign direct investment in China. Conversely, Japan’s Nikkei saw a 2.6% rise, buoyed by yen weakness and strength in semiconductor stocks, amid discussions of potential rate hikes by the Bank of Japan. Overall, while global markets present a mixed picture, there are signs of resilience and optimism in certain sectors and regions.
Published 2/7/2024
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