Weekly markets recap: European stocks rise as Dax hits a fresh high

Expectations for deeper rate cuts by central banks continued to drive the stock rally, particularly in European markets. Germany’s DAX reached a new high on Thursday after the release of cooler-than-expected inflation data. In contrast, Wall Street showed a mixed performance this week, weighed down by a slump in technology shares following Nvidia’s disappointing quarterly earnings.

Europe

European stock markets are set to end the week on a high for the fourth consecutive week, with the Euro Stoxx 600 rising by 1.61%, the DAX advancing by 1.5%, and the CAC 40 up by 0.84% over the past five trading days. The FTSE 100 also gained 0.62%.

The rally was broad-based, with all sectors showing a positive performance, led by industrial and consumer stocks. The DAX reached a fresh high, while the Pan-European Stoxx 600 is nearing a new high following Germany’s surprising drop in consumer prices for August.

Preliminary inflation data showed a cooling to 2% year-on-year, well below the estimated 2.3%. Annual inflation in Spain also eased sharply to 2.2% from 2.8% the previous month, according to flash data.

These cooler-than-expected inflation readings have bolstered optimism that the upcoming Eurozone Consumer Price Index (CPI) will reflect a promising downtrend, potentially prompting the European Central Bank (ECB) to deliver a rate cut next month. Markets are also anticipating two more rate cuts in October and November.

Weekly performance saw industrial stocks outperforming, with Siemens rising 3.3% and Safran increasing by 0.94%. However, big market cap companies were mixed despite a broad rally on Thursday. Novo Nordisk shares rose by 2.6%, while LVMH and ASML fell by 0.51% and 2.65%, respectively. Technology stocks remained under pressure following Nvidia’s disappointing earnings results.

Growing expectations for rate cuts have weighed on the euro, with EUR/USD falling for the second consecutive trading day on Thursday to just above 1.107 in the early Asian session on Friday. The British pound also weakened against the US dollar after reaching a 29-month high on Monday, with GBP/USD pulling back to just above 1.3160 earlier on Friday.

Wall Street

The US stock markets were mixed this week as Wall Street’s rally lost momentum following a stronger-than-expected GDP release for the second quarter, which dampened expectations for deeper rate cuts by the Federal Reserve.

According to preliminary data, the world’s largest economy grew at an annualised rate of 3% in the second quarter, higher than the initial estimate of 2.8%. The upcoming Personal Consumption Expenditures (PCE) report will be closely watched for further insight into the country’s inflation trajectory.

Over the past five trading days, the Dow Jones Industrial Average rose by 0.39% to a new high, buoyed by industrial stocks, while the S&P 500 fell by 0.76% and the Nasdaq Composite dropped by 2.02%, weighed down by technology shares.

At the sector level, all eleven sectors posted weekly gains, with Financials and Industrials leading the charge, up by 1.61% and 1.97%, respectively. Conversely, Technology and Consumer Staples underperformed, with gains of just 0.31% over the past five trading days, and are likely to end the week in the negative.

Nvidia reported quarterly earnings that surpassed market expectations, but its revenue guidance for the current quarter fell short of lofty forecasts. The chipmaker’s shares dropped by 6.38% on Thursday and were down 5% for the week.

Other stocks in the Magnificent Seven group were mostly lower from last week as the sell-off in tech shares continued, with Apple being the sole exception, posting a gain of 2.34% on a weekly basis.

Asia-Pacific

Major benchmarks across Asia extended their weekly gains, with Japan’s Nikkei 225 up by 0.6%, Australia’s ASX 200 rising by 0.7%, and China’s Hang Seng Index advancing by nearly 3%.

Notably, Chinese stock markets posted strong gains in August, buoyed by ongoing efforts to bolster market sentiment. The Hang Seng Index climbed 8% over the past four weeks, recovering from a four-month low reached in July.