Markets Last Week - 08/11/2024

London stocks ended the week on a negative note, with heavy losses driven largely by weakness in the mining sector. Investors were disappointed by China’s latest stimulus package, which, despite its sizable $1.4 trillion value, failed to meet expectations and ease concerns over the country's slowing growth.

The FTSE 100 fell by 0.84%, closing at 8,072.39, while the FTSE 250, which tracks the second-tier companies, slipped 0.57%, settling at 20,517.92. Mining stocks, which are sensitive to global economic conditions and demand from China, were particularly hard-hit, reflecting investor scepticism over the effectiveness of the stimulus measures.

Meanwhile, the British pound also lost ground, down 0.72% against the US dollar at 1.2893. This decline came as US government bond yields pushed higher, particularly in the wake of stronger-than-expected economic data from the States, which raised expectations of further tightening from the Federal Reserve.

The Bank of England (BoE) cut its key rate by a quarter-point to 4.75%, the second reduction this year, with Governor Andrew Bailey suggesting further gradual rate cuts if the economy meets expectations.

In Europe, the STOXX Europe 600 Index declined by 0.84% as concerns grew over how U.S. President-elect Donald Trump’s trade policies might affect European economic growth and central bank policies. Major stock indexes fell: Italy’s FTSE MIB dropped 2.48%, France’s CAC 40 declined 0.95%, Germany’s DAX slipped 0.21%, and the UK’s FTSE 100 decreased 1.28%.

The eurozone composite PMI for October was revised up to 50, signaling stagnation, with manufacturing contracting less than initially estimated and service sector activity rising modestly. Yet, business confidence hit its lowest in 2024.

Sweden’s Riksbank also reduced its key rate by 0.5 percentage points to 2.75%, citing weak inflation and economic slowdown and hinting at potential further cuts. Norway’s central bank, however, kept its rate steady at 4.5%, likely to remain unchanged in December.  

In Germany, political uncertainty intensified as Chancellor Olaf Scholz called for a vote of confidence in January. This followed the collapse of his coalition government after he dismissed Finance Minister Christian Lindner over disputes on spending and reform, with opposition and business leaders urging snap elections to stabilize the situation.

Japan’s stock markets rose, with the Nikkei 225 up 3.8% and TOPIX up 3.7%, driven by positive U.S. election results and the Fed’s rate cut. Despite a stronger yen impacting exports, officials pledged to monitor currency stability closely.

Speculation mounted around a possible January 2025 rate hike from the Bank of Japan as 10-year bond yields reached 1%. Economic data showed a 0.1% drop in real wages in September, with nominal wages at 2.8%, just below inflation, and household spending down 1.1% year-on-year.

Chinese stocks surged as new stimulus from Beijing lifted markets, with the Shanghai Composite up 5.51% and CSI 300 up 5.5%. A RMB 10 trillion debt refinancing plan and raised debt ceiling were announced to tackle local government debt. October exports jumped 12.7%, while imports fell 2.3%, widening the trade surplus. Analysts cautioned about potential trade tensions with the U.S.