Global stock markets suffered sharp losses this week following an intensification of tensions in the Middle East.
Escalation of tensions between Israel and Iran sparked fears of a more widespread conflict in the region, and investors are concerned about the potential impact on international trade and the cost of energy. Having fallen steadily over the summer, oil prices have rebounded in the past few days, and threaten to add to inflationary pressures around the world. Share prices in China have been the world’s best performers for a second consecutive week following the announcement of new stimulus measures but, elsewhere, concern about sluggish economic performance has also weighed on sentiment.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.7% down for the week so far, with the S&P 500 falling by the same amount. The week began on an upbeat note, but share prices fell back on Tuesday after US port workers announced a programme of industrial action that is likely to affect local and global supply chains. There was positive news from the employment market, with new jobs figures coming in higher than expected. However, the uncertainty surrounding the Middle East situation and the upcoming presidential election increasingly dominated sentiment as the week wore on.
UK
In the UK, the FTSE 100 closed on Thursday 0.6% down for the week so far. Large-cap shares in London outperformed their counterparts in Europe thanks mainly to rising oil prices and a sharp decline in the value of sterling. The pound slumped after Bank of England governor, Andrew Bailey, said he and his colleagues were likely to take a more proactive approach to cutting interest rates in the months ahead, with inflation expectations having eased significantly. There was some gloomy economic news, however, with UK GDP for the second quarter of 2024 being revised downward slightly and a reported slump in confidence among manufacturers. Mining stocks were hit by a decline in commodity prices as investors questioned whether China’s stimulus measures would lead to a sustained rise in demand for metals and other resources.
Europe
In Frankfurt, the DAX index ended Thursday’s session down 2.4% for the week, while France’s CAC 40 slumped 3.9%. Tensions in the Middle East and further signs of weakness in the eurozone economy led to significant losses on European bourses, despite the news that inflation in the bloc had fallen to 1.8% – below the European Central Bank target – in September. Figures published on Tuesday showed that manufacturing output in the euro area was falling at its fastest pace this year, while service sector growth in both Germany and France stagnated last month.
Asia
In Asia, the Hang Seng index in Hong Kong gained 7.2% as the impact of last week’s stimulus announcements continued to be felt. On Monday, markets in mainland China recorded their largest single-day rise since the financial crisis. There were particularly strong gains in the property sector after a number of major cities announced a lifting of homebuying restrictions. Japan’s Nikkei 225 index of leading shares, meanwhile, fell 3.2% after the Tokyo market reacted negatively to Shigeru Ishiba taking over as prime minister. Ishiba has supported interest rate rises in the past, and investors are concerned his appointment will make further increases more likely.
September 27 | October 3 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8320.8 | 8269.3 | -0.6 |
FTSE 250 | 21240.6 | 20743.4 | -2.3 |
S&P 500 | 5738.2 | 5699.9 | -0.7 |
Dow Jones | 42313.0 | 42011.6 | -0.7 |
DAX | 19473.6 | 18999.2 | -2.4 |
CAC 40 | 7791.8 | 7485.4 | -3.9 |
ACWI | 852.8 | 842.3 | -1.2 |
Hong Kong Hang Seng | 20632.3 | 22113.5 | 7.2 |
Nikkei 225 | 39829.6 | 38552.1 | -3.2 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 3 October 2024.
