LGT Navigator

Hawkish Powell comments drag down equity markets

Fears of higher interest rates for longer returned to markets late this week following hawkish comments from Federal Reserve (Fed) Chair Jerome Powell on Thursday. Powell reiterated the narrative that reigning in inflation was the Fed’s main focus and further interest rate hikes may be necessary to achieve this goal. That clashed with the views of many market participants, who have recently become confident that peak rates have been reached, driving a strong equity market rally late last week and early this week. Stock markets fell, Treasury yields rose, and the dollar strengthened following Powell’s comments.

Shane Strowmatt, LGT
Reading time
5 minutes
Fed building
© Shutterstock

In New York, stock indices fell breaking multi-day winning streaks for the S&P 500 and Nasdaq-100. The Dow Jones Industrial lost 0.7%. The S&P 500 dropped 0.8%, ending a 9-day winning streak. The Nasdaq-100 also closed 0.8% lower, ending 8 days of consecutive gains.

The negative sentiment spilled over to equity markets in the Asia-Pacific region. In South Korea, the Kospi has erased virtually all of the 7.3% gain it made on Monday after the government announced a short-selling ban. The Kospi has fallen for four trading session in a row and ended Friday’s session down 0.7%. In Tokyo, the Nikkei 225 slipped 0.2%. Australia’s S&P/ASX 200 dropped 0.6%. Hong Kong's Hang Seng Index was the largest regional loser, down 1.5%. The Shanghai Composite fell 0.4%.

European stocks were expected to open lower for the week’s final session but closed up on Thursday, supported by company earnings. The Euro Stoxx 50 ended the up 1.2%, France’s CAC 40 gained 1.1%, Germany’s DAX was up 0.8% and Switzerland’s SMI closed 0.5% higher. Among the companies reporting figures on Thursday were Henkel (+4.5%), Merck KGaA (+3.9%) and AstraZeneca (+2.6%).

In macroeconomic data, recurring applications for unemployment increased for the seventh week in a row in the US last week, data released Thursday showed. The number of initial jobless claims fell slightly to 217,000. A continually increasing number of recurring applications is a sign that cracks are beginning to appear in the US labour market, which has remained surprisingly robust in 2023.

The conflict in the Middle East once again risked expanding beyond Israel and Gaza. Israel said group out of Syria used a drone to strike a school in southern Israel on Thursday, prompting Israeli military forces to retaliate with its own strike. It also issued a warning to the Syrian government that it is responsible for terrorist activity carried out from its territory. A broader regional conflict could have wide-reaching consequences for markets.

Corporate news in focus: Earnings figures from Richemont und Allianz.

Economic data in focus: UK gross domestic product (08:00 CET), UK trade balance (08:00), Italian industrial production (10:00), European Central Bank President Christine Lagarde speaks at a Financial Times’ Global Boardroom event in London (13:30), University of Michigan Consumer Sentiment Index (16:00).


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

Contact us