Global equity markets ended the week mixed, with cautious sentiment prevailing across Asia, Europe and the United States amid persistent inflation concerns, interest rate uncertainty, and geopolitical tensions. As investors assess macroeconomic signals, attention turns to upcoming data releases and central bank commentary in the week ahead.
Asia: subdued performance despite tech resilience
Asian markets struggled for direction this past week, with most indices recording modest losses. Japan’s Nikkei 225 declined by over 1.3%, reflecting a broader retreat from recent highs. Investors remain wary of yen volatility and potential interventions by the Bank of Japan, particularly as the currency nears three-decade lows against the dollar. Chinese equities, meanwhile, were held back by ongoing concerns over property sector instability and subdued consumer demand. The Shanghai Composite edged slightly lower, while the Hang Seng Index in Hong Kong finished the week flat.
Still, pockets of resilience emerged, particularly in South Korea’s Kospi and Taiwan’s Taiex, buoyed by strong earnings from semiconductor giants and optimism about AI-driven demand for advanced chips. However, sentiment across the region remains tentative ahead of key manufacturing data from China and further clarity on government stimulus measures.
Europe: inflation pressure and political risks weigh on sentiment
European stock markets saw mild declines, with the pan-European Stoxx 600 falling by 0.7% on the week. Inflation data released in the eurozone showed headline CPI hovering around 2.4%, fuelling debate over the European Central Bank’s rate-cut trajectory. Although the ECB has signalled a June rate cut is likely, policymakers continue to emphasise a data-dependent approach, leaving markets uncertain.
Germany’s DAX and France’s CAC 40 both retreated slightly, as weaker-than-expected business sentiment readings underlined lingering economic fragility. UK equities were mixed, with the FTSE 100 managing a modest gain, supported by strength in commodity-linked stocks amid a firmer oil price. However, political uncertainty ahead of expected general elections later this year added a layer of caution.
United States: markets pull back ahead of key inflation print
US markets ended the week under pressure, as investors grappled with signs of stickier-than-expected inflation and a lack of clarity on the Federal Reserve’s policy path. The S&P 500 dropped 0.9%, the Nasdaq shed 1.4%, and the Dow Jones Industrial Average lost 2.3%—its worst weekly performance since early April.
A higher-than-forecast reading on services inflation raised concerns that the Fed may need to hold interest rates steady for longer than anticipated. Comments from several Fed officials reinforced a ‘wait-and-see’ stance, diminishing hopes of a summer rate cut. Treasury yields rose in response, putting further pressure on growth stocks. Meanwhile, uncertainty surrounding the US-China trade relationship and continued tech sector volatility added to investor caution.
Outlook: data-heavy week to shape direction
Looking ahead, markets face a dense calendar of economic events. Key inflation figures from the US (core PCE), eurozone flash CPI, and China’s manufacturing PMI will all be closely watched. Any surprises in these data sets could significantly influence expectations for monetary policy moves in the second half of the year.
In the US, attention will also turn to the Federal Reserve’s Beige Book and a host of public appearances from policymakers. In Europe, investors will monitor remarks from ECB President Christine Lagarde for further guidance on the bank’s next steps. Asian markets will respond closely to signs of stabilisation or weakness in China’s industrial sector.
With geopolitical risks—ranging from Middle East tensions to US election dynamics—still lurking in the background, market volatility could remain elevated. For now, caution remains the prevailing mood.
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