Global stock markets experienced a robust rebound this week, buoyed by signs of easing inflation and stronger-than-expected economic data, which have eased concerns of a recession and sparked optimism about a potential interest rate cut by the US Federal Reserve in September.
In the United States, equities saw significant gains as the Dow Jones Industrial Average (DJIA) rose by 2.7% and the S&P 500 climbed by 3.7% for the week. This positive momentum was driven by encouraging inflation data, with the consumer price index (CPI) showing a slight decrease to 2.9% in July, down from 3.0% in June. Additionally, retail sales data, which exceeded expectations with a 1.0% increase compared to a 0.2% decline in June, reinforced the narrative of a potential ‘soft landing’ for the US economy.
European markets followed suit, with the STOXX Europe index up by 2.4% and the UK’s FTSE 100 gaining 1.9%. The positive sentiment in Europe was supported by the strong performance on Wall Street, as well as better-than-expected economic indicators from the UK, including GDP growth and inflation data.
Asian markets also mirrored the gains seen in the US, with Japan’s Nikkei 225 leading the charge, surging by 7.9%. This rally was fueled by Japan’s GDP growth for July, which came in at 0.8%, surpassing the market’s expectation of 0.5% and signaling a robust economic recovery. The Chinese stock market also recorded modest gains, with the Shanghai Stock Exchange (SSE) index rising by 0.6%, driven by hopes for further stimulus measures from Beijing, despite mixed economic data.
Emerging and frontier markets also closed the week on a positive note. The MSCI Emerging Markets (EM) index rose by 0.7%, while the MSCI Frontier Markets (FM) index edged up by 0.9%, supported by bullish sentiments in China (+0.6%) and Vietnam (+2.3%), respectively. The week’s gains across global markets reflect a broader optimism that the worst of the economic downturn may be behind us, with inflation showing signs of cooling and key economic indicators exceeding expectations. Investors are now increasingly hopeful that the US Federal Reserve may consider cutting interest rates in September, which could further support economic growth and market stability in the months ahead.
