Global stock markets have endured another challenging week as doubts about artificial intelligence’s capacity to drive growth have sparked further losses among the world’s largest technology firms.
The week started positively as concern around the disruption caused by last weekend’s major IT network failure started to ease, and investors reacted relatively calmly to news that Joe Biden had decided to withdraw from the US presidential race. However, disappointing quarterly trading reports in the tech sector highlighted the uncertainty surrounding AI’s ability to deliver meaningful earnings growth in the short to medium term.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.9% down for the week so far, with the S&P 500 falling 1.9%. The rotation into small-cap stocks in the US continued in the wake of lacklustre earnings reports from major technology firms. Share prices recovered some of their lost ground on Thursday after new data showed American GDP had grown more quickly than expected in the second quarter. However, despite the ongoing resilience of the US economy, markets still expect the Federal Reserve to cut interest rates at its September meeting.
UK
In the UK, the FTSE 100 closed on Thursday 0.4% up for the week so far. Stocks in London were supported by positive quarterly trading reports as well as upbeat economic data, with figures for business activity in July indicating the strongest rate of private-sector growth since April 2023. Solid earnings figures from travel and consumer goods companies supported gains later in the week, although there were further signs of difficulties in Britain’s utilities sector. Meanwhile, official figures highlighted a slump in housebuilding activity between April and June, and London-listed miners were hit by a decline in copper prices.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.7% for the week, while France’s CAC 40 fell 1.4%. Further signs of weakness in the German economy raised hopes that the European Central Bank will be more inclined to cut interest rates again soon. There was positive news in the shape of improving consumer confidence across the European Union, but stocks in France suffered from weakness among luxury-good firms as well as carmakers.
Asia
In Asia, the Hang Seng index in Hong Kong fell 2.4% despite the surprise decision by China’s central bank to cut interest rates at the start of the week. The move was seen by investors as an admission that the country is in urgent need of additional stimulus measures if it is to meet its economic growth targets for the year. Japan’s Nikkei 225 index of leading shares, meanwhile, slumped 5.5%, returning to levels not seen since April. The country’s technology sector was particularly hard hit by the deterioration in sentiment around AI, while a rise in the value of the yen also had a negative impact on the many Tokyo-listed multinationals.
July 19 | July 25 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8155.7 | 8186.4 | 0.4 |
FTSE 250 | 21067.7 | 20884.4 | -0.9 |
S&P 500 | 5505.0 | 5399.2 | -1.9 |
Dow Jones | 40287.5 | 39935.1 | -0.9 |
DAX | 18171.9 | 18303.9 | 0.7 |
CAC 40 | 7534.5 | 7427.0 | -1.4 |
ACWI | 810.9 | 796.8 | -1.7 |
Hong Kong Hang Seng | 17417.7 | 17005.0 | -2.4 |
Nikkei 225 | 40063.8 | 37869.5 | -5.5 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 25 July 2024.
