LONDON: Global stock markets experienced a notable decline on Friday, responding to indications from both the United States and the United Kingdom that additional interest-rate hikes could be on the horizon. The release of official data from the US and UK raised speculation about potential tightening measures from the Federal Reserve and the Bank of England.
Despite US inflation figures for July coming in below expectations, the data failed to dispel predictions of more rate hikes by the end of 2023. This sentiment was bolstered by robust economic growth reported in the UK. The Office for National Statistics revealed that gross domestic product (GDP) increased by 0.2 percent during the April to June period, attributed in part to strong output in June. The better-than-anticipated growth data raised the likelihood of further monetary tightening by the Bank of England, leading to a boost in the value of the British pound.
Joshua Mahony, Chief Market Analyst at Scope Markets, noted, “Today’s GDP data helps build on the idea that the UK could be on track for a soft-landing akin to that currently being seen in the US. However, that soft-landing narrative also brings with it the potential for a more protracted period of tightening, with the Bank of England under no pressure to ease off on its current path of higher interest rates.”
In the United States, while consumer prices experienced a higher increase last month compared to June, the rise was below forecasts. This dynamic has allowed the Federal Reserve some leeway in approaching monetary policy adjustments, following over a year of incremental rate hikes. While it is widely anticipated that borrowing costs will remain unchanged at the upcoming meeting, experts suggest that a future rate hike could be in the cards due to the resilience of the labor market.
The situation in Asian markets was mixed, with Hong Kong experiencing extended losses while Alibaba, a prominent e-commerce company, saw a surge in its stock value due to impressive revenue growth. In China, concerns lingered over the prospects of measures to stimulate the economy, as recent trade and inflation figures hinted at a slowdown in the post-Covid recovery.
Key Stock Market Figures Around 1045 GMT:
London – FTSE 100: Down 1.0 percent at 7,536.42 points
Frankfurt – DAX: Down 0.4 percent at 15,926.94
Paris – CAC 40: Down 0.7 percent at 7,378.77
EURO STOXX 50: Down 0.8 percent at 4,348.01
Hong Kong – Hang Seng Index: Down 0.9 percent at 19,075.19 (close)
Shanghai – Composite: Down 2.0 percent at 3,189.25 (close)
Tokyo – Nikkei 225: Closed for a holiday
New York – Dow: Up 0.2 percent at 35,176.15 (close)
Currency and oil market movements:
Euro/dollar: Up at $1.0984 from $1.0983 on Thursday
Pound/dollar: Up at $1.2715 from $1.2676
Euro/pound: Down at 86.45 from 86.62 pence
Dollar/yen: Down at 144.56 yen from 144.77 yen
Brent North Sea crude: Up 0.3 percent at $86.66 per barrel
West Texas Intermediate: Up 0.3 percent at $83.04 per barrel
The evolving market conditions suggest heightened sensitivity to potential interest-rate adjustments by central banks, as investors and analysts closely monitor economic data releases and policy signals.
