We could be in for a very European stock markets had a cheery start to Thursday with most major indices hitting new record highs. The FTSE 100, CAC, Ibex and EURO STOXX 50 posted stunning advances, indicative of the tremendous bullishness that investors were feeling. This sharp uptick made headlines across the country and sparked national discussion. Interest is high in understanding what’s making this strong performance possible even in the face of such great global economic uncertainty.
The UK’s FTSE 100 index raced to repeatedly record-highs. The boost came as investors responded to strong corporate earnings last quarter. At the same time, France’s CAC scored impressive enough milestones, notching its own clean record high. Spain’s Ibex followed suit and enjoyed the same degree of glory. The overall EURO STOXX 50 index, which reflected the eurozone’s strength, hit record highs.
In the United States, inflation data has shown to be quite resistant all throughout the Trump presidency. The Consumer Price Index (CPI), which measures inflation, remained flat for both headline and core categories, indicating no significant changes in price levels. This stasis may reflect a wait-and-see mentality among consumers and businesses in an uncertain economic environment.
Yet the US jobs market is still showing persistent weakness, causing serious concern among economists, analysts and such. The Federal Reserve (the Fed) has a dual mandate – to promote maximum employment, in addition to stable prices. With job growth showing signs of coming off the boil, the Fed’s movements in response to incoming inflationary metrics will be critically monitored by market actors.
Traders watch the Producer Price Index (PPI) like a hawk. This index serves as an important economic bellwether for inflationary pressures further up the supply chain, at the wholesale level. Ongoing PPI performance will be key to developing baseline expectations regarding future monetary policy moves. All along, the Fed should proceed with its dual mandate of stable prices and employment.
On the commodities side of things, many of the world’s largest producers enjoyed a double-digit increase today. Fresnillo, Glencore, Rio Tinto and Antofagasta all had their valuations increased. They flourished under a perfect market storm—high commodity prices and unquenched demand for those commodities. Their performance highlights the strength of the commodities market, which looks poised to continue succeeding even as fortunes cycle with the economy.
In the UK, the Ministry of Defence (MoD) issued a warning regarding a projected £28 billion budget deficit that will require funding over the next four years. This announcement has understandably led to anxiety about the possible effects on public spending and long-term fiscal sustainability.
In what has otherwise been a positive market day, JP Morgan Chase sees its stock price down over 4%. This drop happened despite the large financial institution beating expectations on both the top and bottom lines. Analysts are now left to wonder whether investor sentiment was dampened by fears over macroeconomic conditions or company-specific fears about the bank’s future.
European markets are basking in the glow of central bank optimism and hitting record highs. At the same time, the complicated interplay of US economic signals and corporate earnings heavily shapes investor tactics. The stability of US inflation metrics may provide some reassurance. Persistent weaknesses in the jobs market present challenges that could influence future market dynamics.