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Equity markets across the globe were in retreat as inflation signaled a possible resurgence, sparking concerns about likely “higher-for-longer” interest rates. Profit-taking could also be the cause of such a pullback amid an uptick in global government bond yields after major indices hit all-time highs on both sides of the Atlantic. The retracement is primarily seen in the mining sector in Europe due to a sharp decline in copper prices. The US technology stocks also added to the market losses after a 20% plunge in Salesforce’s shares following a disappointing earnings report on Thursday. 

Europe

European stock markets are set to end the week on a negative note, mirroring the global market trends. Germany’s estimated inflation came to 2.4% year on year for May, in line with the expectation but up from 2.2% in the previous month. Investors are awaiting the flash inflation data for May in the euro area that is due for release on Friday morning. This data is critical for the European Central Bank (ECB) rate decision next week.  

Over the five-day trading period, the FTSE 100 fell by 1.04%, the Euro Stoxx 600 was down 0.68%, the DAX slipped 0.96%, and the CAC 40 slid 1.44%.

BHP abandoned the bid to take over Anglo-Americans, which caused a drop in the British miner’s stock. Anglo-American’s shares fell 8% over the past five trading days. A sharp retreat in copper prices has sent mining stocks lower broadly, with Rio Tinto down 4%, Glencore down 0.82%, and Antofagasta Plc. sliding 2.86% during the same time frame. 

The energy stocks were resilient despite a decline in crude prices. Over a five-day trading period, Shell’s shares were up 1.95%, BP rose 0.13%, and TotalEnergies slightly advanced 0.15%. 

On the other hand, luxury consumer stocks continued to slide on expectations for a shrinking profit margin, with the Stoxx Euro Luxury 10 index down 1.09% weekly. Major healthcare stocks were slightly lower,  with Novo Nordisk down 0.76% and AstraZeneca slipping 1.92% during a five-day trading period. 

In currencies, both the euro and the British pound were flat against the US dollar this week. The range-bound movement may have been due to uncertainties around central banks’ upcoming decisions on future interest rates, which caused a swing in the respective government bond yields. Notable, the Swiss Franc strengthened against other major currencies after Switzerland reported greater than expected GDP growth of 0.5% in the first quarter, compared to the expected 0.3%. 

Wall Street

The US stock markets are also heading for a negative close for the week, with the Dow Jones Industrial Average down by 2.45%, the S&P 500 sliding by 1.31%, and the Nasdaq slipping by 1.09% over the past five trading days. 

While expectations for “higher-for-longer” interest rates pressed on sentiment, investors will be closely watching the upcoming Personal Consumption Expenditure (PCE) index that is due for release on Friday, which is seen as the Federal Reserve’s favorite measure of inflation. 

At a sector level, all the eleven sectors in the S&P 500 are in the red for the week, with technology exhibiting the biggest decline of 3.25%. This might be due to risk-aversion sentiment igniting a profit-taking moment on Wall Street. The utility sector is the best performer due to bets on growing power demand on the AI boom. The sector rotation is also in favour of utility stocks after the sector suffered the most in 2023.  

The Magnificent Seven stocks were mostly down for the week except for Nvidia. The biggest laggards in this group were Microsoft, Amazon, and Alphabet, down between 2% and 4% over the past five trading days. Nvidia was the sole winner in tech stocks following its stunning first-quarter earnings report last week. The AI chip market’s shares surged 16% weekly, despite a 3.8% pullback on Thursday. 

On the economic front, the US first-quarter Prelium GDP was revised down to 1.3% at an annualised pace from the first reading of 1.6%. The growth is much slower than in the previous quarter at 3.4%, which could be a good sign for stocks as slowing economic growth may prompt the Fed to losen the monetary policy sooner. 

Asian Markets

Most Asian indices may be poised to close lower for the week despite a higher open on Friday. China’s economic rebound showed faltering progress as the manufacturing PMI contracted after two consecutive expansions, while non-manufacturing PMI rose at a softener pace in May. The index is down about 2% on a weekly performance. Meanwhile, the Japanese benchmark index, the Nikkei 225, is 0.9% lower over the past five trading days.

The Australian stock market average, the ASX 200, fell by 0.64% during the last five trading days as major mining stocks declined amid sliding commodity prices this week. Sentiment soured, which mirrored the global markets. The country reported hotter-than-expected inflation for April, while its retail sales slowed from the previous month.