US blue-chips ended the week lower after investors assessed mixed economic data and central bankers reiterated their commitment to fighting inflation, cooling investors’ appetite for risk.
Wall Street’s S&P 500 index added 1.9 per cent on Friday, but shed 0.7 per cent in a week that had four trading sessions owing to Monday’s public holiday. The tech-heavy Nasdaq Composite rose 2.7 per cent on Friday for a gain of 0.6 per cent on the week.
Economic data released this week showed retail sales and wholesale prices fell more than expected in December, with the former stirring concerns about the health of the American consumer, but the latter indicating a slowdown in price growth.
Meanwhile, a four-month low in weekly jobless claims suggested that the US labour market remains robust despite the Federal Reserve’s efforts to raise borrowing costs. However, several high-profile companies, such as Microsoft and Google parent Alphabet, announced this week that they would lay off tens of thousands of workers.
Shares in Alphabet on Friday climbed 5.3 per cent after it said it would fire 12,000 staff, or about 6 per cent of its workforce. Better than expected subscriber numbers sent shares in Netflix surging 8.5 per cent even as co-founder Reed Hastings announced his departure as chief executive.
Wall Street stocks were given a mid-session boost after Fed governor Christopher Waller backed a quarter-point interest rate rise by the US central bank at its next policy meeting in February, a slowdown from its recent pace.
This came after European Central Bank president Christine Lagarde and Federal Reserve vice-chair Lael Brainard pledged on Thursday to “stay the course” on interest rate increases, signalling to markets that borrowing costs are unlikely to fall anytime soon. Signs of slowing US economic growth further dented investor confidence, dragging down equity markets that have made a relatively strong start to the year.
“In the past two months or so, equities and bonds have both cheered the early signs of disinflation and softening growth, as they reinforced the peak-rates narrative,” said analysts at Barclays. “But the ‘bad data is good news for equities’ mantra seems over now in the US.”
“In contrast, Europe appears to be in a sweet spot right now,” the bank added. “Disinflation hopes have pushed yields lower despite a hawkish ECB, and improving economic sentiment due to falling energy prices and China reopening has pushed up equities.”
Wall Street stocks have fallen out of favour with many big investors. Global fund managers have cut allocations to the US stock market to the lowest level for 17 years, according to a closely watched Bank of America survey released this week. After years on the sidelines, European and emerging market stocks are back in vogue.
Hong Kong’s Hang Seng index and China’s CSI 300 have risen 50 per cent and 20 per cent, respectively, since the start of November as Beijing has reversed strict zero-Covid policies in place since early 2020. The indices climbed 1.8 per cent and 0.6 per cent on Friday.
In Europe, the regional Stoxx 600 added 0.4 per cent, Germany’s Dax rose 0.8 per cent and London’s FTSE 100 gained 0.3 per cent.
Elsewhere, prices for Brent crude, the international oil benchmark, settled 1.7 per cent higher to $87.63 a barrel, gaining for the second straight week as traders expressed optimism that China’s reopening would boost fuel demand.
A measure of the dollar’s strength against a basket of six peers fell 0.1 per cent. The currency has declined more than 8 per cent over the past three months.