Global stocks witnessed a surge on Friday, nearly touching record peaks, as the US dollar reeled around its weakest point in a year, following confirmation from the world’s leading central bank that there would soon be a slashing of interest rates. Jerome Powell, the Chair of the US Federal Reserve, announced at Jackson Hole’s annual economic symposium in Wyoming on Friday, that interest rates would need to be cut due to increasing pressures on the employment sector and no room for additional frailty, with inflation nearing the Federal Reserve’s 2% objective, thereby formally endorsing a forthcoming policy relaxation.
According to Peter Cardillo, Chief Market Economist at Spartan Capital Securities in New York, Powell’s comments mean that if the job market continues to deteriorate, a 0.50% interest rate cut might be underway, rather than a 0.25% cut, in September. Following a minor 0.1% decrease of Asian stocks outside Japan, the European Stoxx 600 index rose by 0.5%. However, Japan’s Nikkei saw a 0.4% increase as investors assessed inflation figures and comments from Bank of Japan’s Governor Kazuo Ueda, indicating a readiness to boost interest rates if the economy and inflation meet expectations.
In other news, China is currently tackling grave economic challenges in the short term. EY Entrepreneur of the Year honours were awarded across a range of industries, from AI healthcare to the largest cold store operator in sub-Saharan Africa. In Ireland, there is anticipation for the economic showdown between Trump and Kamala Harris.
In Dublin, Corre Energy bounced back by 6.6% after a downfall in its stock in the prior session, following the resignation of the interim chairman, and the company in talks with major shareholders for temporary working capital. Ryanair witnessed a 2.2% increase, in light of an optimistic outlook on the global economy. AIB’s and Bank of Ireland’s responses to the expected rate cut in the US varied, with AIB slightly falling and Bank of Ireland seeing a minimal rise. Meanwhile, Datalex’s shares fell dramatically by 7% to 37 cents in the travel software sector.
Shares in Nestle experienced a significant drop, the biggest they’ve seen in nearly a month, following the announcement that Laurent Freixe will succeed Mark Schneider as the CEO. Investors and analysts are uncertain about how this unanticipated change in leadership might affect Nestle’s current financial outlook. Meanwhile, Dino Polska saw a decrease in their shares after a disappointing earnings report. In contrast, Europe’s main index has managed to pick itself up after a challenging start to August, with resilient economic figures alleviating fears of an economic downturn in the US. The market is already assuming almost 100 basis points worth of reductions in interest rates by Christmas, as per swaps data.
The UK’s leading FTSE 100 index experienced a slight increase on the last day of the working week, with global markets reacting positively to comments made by Mr Powell. Although the prestigious FTSE 100 index increased by 0.5 per cent, it ended up with overall weekly losses. The FTSE 250, a mid-cap index, rose by 0.4 per cent, reaching the highest point it’s seen in a fortnight and recording its second consecutive weekly increase. With regard to the interest rates in the US, the traders unanimously expect a reduction in September, with a third of them predicting a cut of half a point.
Andrew Bailey, the Bank of England’s governor, suggested that inflation pressure within the UK economy seems to be lessening in contrast to previous years, but stated it’s too soon to confirm this observation. Gold-mining stocks saw a 1.2 per cent increase as gold prices continued to climb, likely in response to Mr Powell’s cautious statements. Indexes related to rate-sensitive real estate investment trusts and life insurance saw increases of over 1 per cent each, while the retail sector led the increase, with a 1.9 per cent jump. Conversely, shares in the aerospace and defence sectors dropped by 0.5 per cent, led by Melrose Industries, an aerospace components supplier, which on the back of a double rating downgrade from UBS, fell by 7.1 per cent. Shares in Direct Line declined by 2 per cent when the home and car insurer noted an alteration in its solvency capital figure for 2023.
Turning to New York, Wall Street’s stock indexes experienced significant growth on the last business day of the week due to Mr Powell’s comments. The S&P 500 index increased substantially and neared its high point from July, rebounding almost 10 per cent from that level from the beginning of the month.
Huge tech companies like Meta and Amazon.com saw a 1% rise each, contributing to the index’s overall increase, while semiconductor companies such as Nvidia and Broadcom witnessed over a 3% surge each.
In other news from Friday, Workday’s shares spiked by 11.2% following the HR software company’s successful surpassing of predicted revenue for the second quarter and disclosure of a £890 million stock buyback strategy.
In future collaboration news, Cruise, supported by General Motors, announced plans to launch self-driving cars on Uber’s ride-hailing app from next year. This move, part of Cruise’s revival strategy, helped the car manufacturing company’s shares to rise by 2.2%. Further information was provided by Reuters.