Global markets are poised for a third consecutive weekly decline as tensions rise in the Middle East. Investors are flocking to safe-haven assets, especially gold and silver, amplifying their surge as a safety destination.
Global stock markets are on track for their third consecutive week of decline amidst escalating tensions in the Middle East conflict. Reports of explosions in Iran have further fuelled concerns, deepening losses across major world benchmark indices.
As risk aversion sentiment prevails, investors are flocking to traditional safe-haven assets such as gold, silver, government bonds, and the US dollar. The Japanese Yen and the Swiss Franc have also seen significant spikes as investors seek refuge. Additionally, crude oil prices surged over 3%, with Brent futures surpassing $90 per barrel following the early Friday attack.
Europe
Major indices are set to extend losses for the third consecutive week. The Euro Stoxx 600 is down 1.36%, the DAX is sinking 0.44%, and the FTSE 100 is slumping 1.48% over the past five-day trading period.
The technology sector led to broad losses as ASML’s shares tumbled more than 8% this week after the Dutch AI-chip equipment manufacturer reported earnings that missed the market’s expectations. The company’s sales dipped 22% due to weakened demands for semiconductor makers like TSMC, Samsung, and Intel.
Additionally, consumer stocks took a hit as LVMH reported lackluster sales growth in the first quarter, causing the luxury brand’s stocks to dip by 2% on Wednesday but flat for the week. LVMH’s first-quarter sales grew by 3% year on year, a sharp deceleration from an 18% surge in the same quarter of 2023, attributed largely to a 6% drop in Asian sales, excluding Japan.
On the flip side, utilities and real estate stocks showcased notable resilience, each posting gains of over 1% in the past five trading days. The European Central Bank’s consistent hints at a potential rate cut in June, coupled with market projections of three cuts throughout the year, bolstered these rate-sensitive sectors.
Furthermore, defence and aerospace stocks maintained their strength amidst escalating tensions in the Middle East and growing demands for heightened military expenditure.
Another notable trend is the resilience of mining stocks within the FTSE 100, driven by the upward trajectory of metal prices, particularly in copper and iron ore. This buoyed the basic materials sector, which gained 2% overall, with Rio Tinto climbing 2.7% and Glencore advancing 2.8% over the past five trading days.
However, the energy sector experienced a slowdown as oil prices dipped earlier in the week, there’s been a rebound following the strikes in Iran on Friday.
Wall Street
The three US benchmark indices extended decline following the Fed Powell’s indication of “higher-for-longer” interest rates amid a resurgence in inflation for March. Markets are projecting the first rate cut to be in September instead of June, or even not cuts this year, after the country reported resilient retail sales data this week.
Wall Street is poised for a three-week losing streak, with the S&P 500 down about 2.19%, the tech-heavy index, Nasdaq, slumping 3.55%, and the Dow Jones Industrial Index falling 0.55% over the course of the five-day trading period.
All the 11 sectors in the S&P 500 are on a negative note for the week, with the technology sector leading losses, plummeting by 4.75% over the past five trading days.
Semiconductor stocks bore the brunt of ASML’s disappointing earnings report, with Nvidia witnessing a steep decline of 6.56%, AMD plunging by 9.04%, and Intel falling by 6.88% weekly.
Tesla’s stocks sank 14% this week after the EV maker announced a more than 10% headcount cut globally. Other magnificent seven stocks are all in the red, with Microsoft, Apple, Amazon, Meta, and Alphabet, all experiencing declines ranging from 2% to 5% on their weekly performance.
Despite Netflix’s earnings beating expectations, its weak guidance led to a 4.8% decline in its share price during after-hours trading on the Nasdaq. This development may exacerbate the downward pressure on sentiment within the technology sector, particularly amidst the escalating conflict in the Middle East.
Asian Markets
The Asian markets were not immune to the prevailing risk-aversion sentiment, with stock markets in major economies posting losses for the week. The Japanese benchmark index experienced a significant downturn, shedding 6% over the past five trading days, largely influenced by declines in technology and consumer stocks in line with global trends. Tokyo Electron saw its shares slump by 13.5%, while Toyota Motors fell by 6.8% during the same period.
In contrast, Chinese mainland stock markets showcased resilience, outperforming global counterparts in response to upbeat first-quarter GDP data.
China’s economy expanded by 5.2% year-on-year, surpassing expectations of 4.8% growth. The China A50 index surged by 2.33% for the week, propelled by gains in financials and energy stocks. Recent economic indicators, including exports and industrial production, signal a strengthening of China’s economic recovery. In light of these developments, Morgan Stanley has revised its projections, anticipating a faster growth trajectory for China’s economy compared to previous forecasts.
Other markets are facing downward pressure, with the ASX 200 declining by 3.13%, the Nifty 50 slipping by 3.25%, and the Hang Seng Index, more exposed to global market dynamics than mainland China, falling by 3.25% over the past five trading days.