Economic Indicators To Dictate Global Equity Markets

Although the economic outlook is sending mixed signals regarding the near-term path, there are still reasons for investors to maintain optimism about the markets, even amidst a slowdown in growth. [EasyDNNnews:PaidContentStart]

In the past fortnight, global equities continued their upward trajectory, contributing to the impressive gains seen in the first half of 2023. In the US, the S&P 500 is now within a mere 6-7 per cent of its all-time high. Corporate earnings announcements provided an additional boost to market sentiment, as Quarterly Results have thus far indicated that companies are effectively navigating the challenges of high but decreasing inflation, particularly concerning labour and input costs, as well as strong but moderating demand. 

Since May, the market rally has been fueled by growing optimism surrounding the potential for a 'goldilocks scenario,' characterised by economic conditions that strike a balance between being neither too hot to hinder the decline of inflation nor too cold to plunge into a recession. This favourable economic outlook has been a key driver of the market's positive performance. 

The pan-European STOXX Europe 600 Index concluded the past fortnight with a 0.95 per cent increase, driven by hopes that evidence of slowing inflation could signal the end of monetary policy tightening. Most major Continental stock indexes saw modest gains, with Italy's FTSE MIB rising by 0.67 per cent, France's CAC 40 Index gaining 0.79 per cent, and Germany's DAX adding 0.45 per cent. The UK's FTSE 100 Index surged by 3.08 per cent, partly benefiting from the depreciation of the British pound against the U.S. dollar, as the index includes multinational companies with overseas revenues. 

European government bond yields generally edged lower due to cooling inflation in both the U.S. and the UK, fostering expectations that major central banks might be nearing the end of tightening monetary policy. In the eurozone, revised figures revealed that the economy avoided a recession in the first quarter of the year, remaining unchanged instead of contracting as previously estimated. 

In the last week of July, in Japan, the stock markets exhibited mixed performance, with the Nikkei 225 Index declining by 0.3



Economic Indicators To Dictate Global Equity Markets Although the economic outlook is sending mixed signals regarding the near-term path, there are still reasons for investors to maintain optimism about the markets, even amidst a slowdown in growth. Global Market Watch per cent and the broader TOPIX Index gaining 1.0 per cent. Investor caution surrounding the monetary policy meeting and a slight tempering of expectations for adjustments to the yield curve control (YCC) framework influenced market sentiment. 

On the other hand, Chinese equities experienced a retreat as recent economic data indicated faltering growth. In local currency terms, the Shanghai Stock Exchange Composite Index plummeted by 2.16 per cent, while the blue-chip CSI 300 declined by 1.98 per cent. In Hong Kong, the benchmark Hang Seng Index fell by 1.74 per cent. 

China's gross domestic product expanded by 6.3 per cent year-over-year in the second quarter, falling below expectations but still faster than the 4.5 per cent growth rate recorded in the first quarter. On a quarterly basis, the economy grew by 0.8 per cent, down from the first quarter's 2.2 per cent expansion. Comparisons from a year ago, when cities like Shanghai were under pandemic lockdown, provide a better reflection of underlying growth in China. Despite steady unemployment at 5.2 per cent in June, youth unemployment surged to a record 21.3 per cent.

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