Stock Market Update
The stock market experienced a decline on Friday, with major indexes such as the Dow and S&P 500 retreating from record highs. This downturn was largely driven by a key US inflation reading that exceeded expectations, reducing the likelihood of sustained interest rate cuts in the coming months.
Inflation Concerns
The personal consumption expenditures (PCE) price index remained steady at 2.6 percent in July, surpassing the Federal Reserve’s target of 2 percent. The core reading, which excludes food and energy, accelerated slightly to 2.9 percent. According to Bret Kenwell, an analyst at eToro, "The bad news is, inflation is continuing to inch higher, which isn’t really the environment the Fed likely wants to cut in." Although a 25 basis point cut is still expected in September, the rising inflation may limit the Fed’s ability to make aggressive cuts.
Global Market Trends
The main US indexes fell ahead of the long Labor Day weekend, with the Dow and S&P 500 closing at all-time highs on Thursday. In Europe, German data revealed that unemployment surpassed three million in August for the first time in over a decade. The country’s manufacturers are struggling due to high energy costs and intense Chinese competition. German inflation rose to 2.2 percent in August, which may reduce the chances of further European Central Bank rate cuts.
European Market Update
Separate figures showed that inflation slowed in France and Italy this month, while holding steady in Spain. In Britain, a think tank suggested that the government could raise billions of pounds by imposing a windfall tax on banks. This led to significant declines in bank stocks, with NatWest falling 4.4 percent on the FTSE 100 index.
Key Figures
At around 2035 GMT, the key figures were:
- New York – Dow: DOWN 0.2 percent at 45,544.88 points (close)
- New York – S&P 500: DOWN 0.6 percent at 6,460.26 (close)
- New York – Nasdaq: DOWN 1.2 percent at 21,455.55 (close)
- London – FTSE 100: DOWN 0.3 percent at 9,187.34 (close)
- Paris – CAC 40: DOWN 0.8 percent at 7,703.90 (close)
- Frankfurt – DAX: DOWN 0.6 percent at 23,902.21 (close)
Conclusion
In conclusion, the stock market’s decline on Friday was largely driven by concerns over rising inflation and its impact on interest rate cuts. The global market trends indicate a decline in major indexes, while European markets are experiencing a mix of inflation slowdowns and potential tax implications. As the market continues to evolve, it is essential to monitor key figures and trends to make informed investment decisions.
