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Stock markets fall despite solid economic data

Strong economic data to start the week pushed equity markets around the globe into the red. The positive economic releases alongside Friday’s sticky US inflation data have caused investors to push back their expectations for interest rate cuts yet again, which weighed on markets. The CBOE Volatility Index - a gauge of market fear - spiked on Tuesday and gold saw more new highs, trading around USD 2283 per ounce. Oil prices also pushed higher with West Texas Intermediate (WTI) crude trading above USD 85 and Brent above USD 89 per barrel.

Shane Strowmatt, LGT
Tempo di lettura
5 minuto
Falling market
© Shutterstock

The Job Openings and Labor Turnover Summary by the US Bureau of Labor Statistics showed the number of job openings in the world’s largest economy remained stable in February. A total of 8.8 million jobs remained vacant as of the last business day of February. While that figure is little changed from the previous month, it has come down significantly from a high of 12.2 million in March of 2022. But the still relatively high number is concerning to investors who had hoped a rapid deterioration in the labour market would help the Federal Reserve (Fed) to lower rates soon. In New York, the major stock indices suffered on Tuesday. The Dow Jones Industrial fell 1% and the S&P 500 slipped 0.7%. The Nasdaq-100 was also down 1%.

The negative sentiment spilled over into the Asia-Pacific region, where the major indices were also red across the board. Hong Kong's Hang Seng Index lost about 1%, dragged down by losses at electric car makers, while the Shanghai Composite was trading 0.2% lower on Wednesday. The losses on Chinese markets came despite a strong Services Purchasing Managers’ Index (PMI) reading of 52.7 for March, up from 52.5 in February. In Tokyo, the Nikkei 225 was down 1% and in South Korea, the Kospi lost 1.4%. In Australia, the S&P/ASX 200 lost 1.3%.

Economic signals out of Europe suggested inflation is falling on the continent alongside economic output. On the positive side was German inflation, which came in at an annual rate of 2.2% in March, just slightly above the European Central Bank’s target of 2% inflation. That’s the lowest figure since April 2021. Core inflation - which excludes volatile food and energy prices - was 3.3%, according to the initial estimate for March. The decrease in prices in Europe’s largest economy and elsewhere in the euro area has been accompanied with sluggish economic growth. Manufacturing PMI for the euro zone in March suggested there is more contraction to come. Manufacturing PMI fell to 46.1 in March from 46.5 in February, well below the 50 level, which separates contraction from expansion. The combination of slowing inflation and contracting manufacturing activity should make the European Central Bank’s (ECB) decision whether to lower interest rates at its upcoming policy meetings easier. Markets expect the ECB to begin cutting interest rates at latest by its June meeting in an effort to support the weak economy. The Euro Stoxx 50 lost 1.2% and Germany’s DAX dropped 1.1% on Tuesday.

In Switzerland, seasonally adjusted retail sales fell by 0.2% in February when compared with the previous month or 0.4% when compared with the same period a year earlier. The release of the falling retail sales data comes just two weeks after the Swiss National Bank (SNB) surprised markets with an interest rate cut, citing falling inflation and a strong franc as reasons for the move. The SMI finished Tuesday’s session with a loss of about 1.2%.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Turkish Consumer Price Index, euro area consumer prices, euro area unemployment rate, US ADP National Employment Report, US Composite PMI, ISM Services PMI, Federal Reserve Chair Jerome Powell presents his economic outlook at the Stanford Business, Government, and Society Forum in California.

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