Global equity markets recovered some losses from earlier in the week on Thursday as traders looked for deals among the sectors that have seen the heaviest drops since the beginning of the year. On Friday, investors will digest a series of macroeconomic releases such as Producer Price Indices out of Europe and the University of Michigan Consumer Sentiment Index later in the day. Any further comments from policymakers speaking at the last day of the World Economic Forum in Davos could provide further impulses. European Central Bank President Christine Lagarde takes part in a discussion on global economic outlook in Davos at 11:00 CET.
US stocks were able to reverse this week’s downward trend with broad gains on Thursday. Traders could also digest some macroeconomic data on Thursday with US initial jobless claims falling to the lowest level since 2022, decreasing by 16,000 to 187,000 last week. In the past months, strong US labour market data has caused markets to pull back out of fear that the Federal Reserve (Fed) could leave interest rates higher for longer. But Thursday, the major indices soared with tech stocks leading advances. The Dow Jones Industrial gained 0.6% and the S&P 500 jumped 0.9%. The tech-heavy Nasdaq-100 outpaced other indices, closing 1.5% higher on Thursday.
In individual stocks, chipmakers made gains on Thursday after Taiwan Semiconductor Manufacturing Co (TSMC) released quarterly figures and said it expects strong growth in the current quarter. Shares in companies such as ASML (+4.5%), Monolithic Power Systems (+4.5%), Qualcomm (+4.3%), Nvidia (+1.9%) and AMD (+1.6%) were among the winners.
In the Asia-Pacific region, stock markets were also soaring to finish the week with the exception of Chinese stocks. The region’s biggest gains were in Taiwan with the Taiwan Weighted Index trading up 2.6% on Friday, supported by gains of TSMC shares, which shot up 6.6%. In Tokyo, the Nikkei 225 closed 1.4% higher after the country released inflation data that showed prices increasing at the slowest rate since June 2022 at 2.6% on the year. The Bank of Japan will consider the fresh data when announcing its first policy rate decision of the year next week. In South Korea, the Kospi shot increased 1.3%. Australia’s S&P/ASX 200 also gained 1%. Hong Kong's Hang Seng Index was down 1%, while the Shanghai Composite was trading 0.3% lower on the last session of the week.
Geopolitical tensions continued to escalate on multiple fronts over the week, causing uncertainty for markets. On Thursday, Pakistan’s military struck militant hideouts in Iran in retaliation for an attack by Iran a day earlier. In the Red Sea, the US designated the Iran-aligned Houthis of Yemen a terrorist organization and launched airstrikes against the rebel group. Additionally, two elite US Navy Seals troops went missing in the waterway during a mission that was targeting a vessel transporting Iranian-made missile parts destined for Somalia. Tensions between Israel and the Hezbollah movement of Lebanon, which is also linked to Iran, have also escalated in the new year.
The broadening of the conflict across multiple fronts is a concern for markets, particularly due to the importance of the area for energy production and as a transport route. So far, oil prices have not reacted much, with Brent trading around USD 79 per barrel and West Texas Intermediate trading at about USD 74 after falling about 20% in the few last months of 2023. The series of conflicts nevertheless has many investors on edge, causing the CBOE Volatility Index – a gauge of market fear – to spike to its highest levels since early November this week. Gold – which often sees demand in crisis situations – has come down from highs in November and December and is now trading around USD 2023 per ounce.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: The final day of the World Economic Forum in Davos, UK retail sales, German Producer Price Index, Swiss Producer and Import Price Index, European Central Bank President Christine Lagarde speaks in Davos, Canadian retail sales, University of Michigan Consumer Sentiment Index, US existing home sales.
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.