Markets closed the week with an uneventful whimper last Friday, although the Nasdaq Composite managed to eke out a fifth consecutive all-time high by the skin of its teeth. US indices were at the whims of two opposing forces last week: on the one hand rising tech stocks provided a decent amount of buoyancy thanks to AI related optimism, on the other hand lingering inflationary fears forced the Fed to dial back on its former commitment of three rate cuts this year down to just one. The result was an impressive 3.2% gain for the Nasdaq Comp and an adequate 1.6% rise for the S&P 500. The Dow Jones, lacking the crutch of major tech companies, lost half a percent on the week.
The going was a lot tougher for European indices, many of which at the mercy of political turmoil. The UK’s FTSE100 and German DAX closed the week 1.2% and 3% lower respectively, but the French CAC 40 boasted the biggest losses with a 6.2% close in the red. The fall comes as markets digest the implications of the snap election called by Macron, now just two weeks away. The usual fears of contagion will no doubt continue to agitate market participants for the rest of the month.
On Wednesday the US Bureau of Labour Statistics surprised markets with lower than expected inflation figures, however the good news was not enough to offset the significant amount of data pointing in the opposite direction. Several Federal Reserve board members were indeed keen to douse enthusiasm concerning imminent rate cuts. A quick glance at the Dollar currency index tells us all we need to know about the immediate prospect of a monetary pivot - the DXY gained over half a percent last week to secure the 105.5 level.
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