Major global stock indices rose modestly for the week, despite U.S. equities lagging on hawkish commentary from the Federal Reserve. Chinese equities performed best, as domestic investment continued to propel share prices higher.
US: Stocks ease on hawkish commentary from the Federal Reserve
Major U.S. stock indices finished the week lower, driven in part by hawkish commentary from Federal Reserve officials that dampened optimism around the pace of further interest rate cuts. Fed Chair Jerome Powell noted that the economy is in a “challenging situation” due to near-term upside inflation risks and downside labour market risks, while also acknowledging that “equity prices are fairly highly valued.”
The Nasdaq Composite fared worst, falling 0.65%, followed by the Russell 2000 Index, which registered its first weekly loss since early August. Inflation was little changed in August, with the core personal consumption expenditures (PCE) price index showing a 0.2% rise, in line with estimates and July’s revised reading.
Across both the manufacturing and services sectors, businesses’ expectations for output over the next 12 months improved to the highest level in four months.
Japan: Stocks rise as expectations for a near-term interest rate hike are tempered
Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 0.69% and the broader TOPIX Index up 1.25%. Expectations of a near-term interest rate hike by the Bank of Japan (BoJ) were tempered by a lower-than-expected Tokyo area consumer inflation print, while Japanese pharmaceuticals lagged after the latest U.S. tariff announcements targeted the sector.
Political uncertainty weighed on the yen, given a range of possible outcomes in the Liberal Democratic Party’s (LDP) presidential election. The Tokyo area consumer price index rose 2.5% year on year in September, steady from the prior month but short of economists’ forecasts of 2.8%. The softer inflation reading, largely due to temporary subsidies, eased near-term rate hike expectations.
China: Stocks climb in a quiet week for economic data
Mainland Chinese stock markets recorded a weekly gain. The onshore CSI 300 Index advanced 1.07% and the Shanghai Composite Index added 0.21% in local currency terms, according to FactSet.
No major economic indicators or corporate earnings were released during the week, leaving traders with little fresh data. Instead, strong domestic liquidity has fuelled market gains since April, with cash-rich households seeking higher returns amid low interest rates and limited alternatives.
Investor sentiment has also been boosted by breakthroughs in homegrown artificial intelligence startups and Beijing’s “anti-involution” campaign to curb excessive price competition across industries.
Europe: Business activity rises to highest level in 16 months in eurozone
Major European stock indices were firmer. Italy’s FTSE MIB gained 0.79%, Germany’s DAX rose 0.42%, and France’s CAC 40 Index added 0.22%.
The eurozone economy maintained a modest pace of growth in the third quarter, according to purchasing managers’ surveys. The HCOB Flash Eurozone Composite PMI Output Index rose to a 16-month high of 51.2 in September from 51.0 in August, with services activity driving growth while manufacturing expanded more slowly.
German business sentiment, however, fell sharply according to the Ifo Institute, while consumer confidence surveys from GfK and the Nuremberg Institute showed households were somewhat less pessimistic about their income prospects heading into October.
UK: Stocks rally despite consumer confidence falling to lowest level since June
The UK’s FTSE 100 Index rallied 0.74% over the week. However, PMI data fell to 51.0 from August’s 12-month high of 53.5. Activity in both the services and manufacturing sectors slowed, with output in the latter declining at the fastest rate since March, partly due to auto industry disruptions.
Business confidence also slipped to its lowest level since June, reflecting caution ahead of the November budget. Bank of England Chief Economist Huw Pill noted that reducing the pace of “quantitative tightening” would provide only temporary relief to gilt market turbulence, emphasising that other tools were better suited to addressing rising borrowing costs.