London (AFP) – Wall Street swung higher at the end of a choppy week of trading that saw the Nasdaq set a fresh record but worries the US Federal Reserve could keep interest rates higher for longer feed fears the rally may be losing steam.
The gains in New York helped European markets recover to close the day flat or with narrow losses.
“It remains to be seen whether the recovery will hold in light of the big reversal signs we saw on Thursday,” said Fawad Razaqzada, analyst at City Index and Forex.com.
He said traders “were happy to book a profit” on tech stocks on Thursday, with many “likely to have taken Friday off” ahead of Monday’s Memorial Day holiday.
European and US indices have rallied to new records recently thanks to solid first quarter earnings by companies and their positive outlook despite the fact it is looking increasingly unlikely the Fed will begin cutting interest rates this year.
Blockbuster earnings by AI chip firm Nvidia helped propel the Nasdaq Composite to new highs this week, but other markets have been hobbled by concerns that the market is now overbought. “With earnings season largely behind us, we will now see markets following the economic data more closely, and unfortunately we look set for a protracted period of high rates if recent inflation data is anything to go by,” said Scope Markets analyst Joshua Mahony.
Other data showing the US economy is coping with high interest rates, thus reducing any pressure on the Fed to cut them, has also been denting confidence in a quick reduction in borrowing costs. On Friday it was US durable goods orders for April, which rose 0.4 percent month-on-month excluding the volatile transportation sector. That followed data Thursday showing that services sector showed activity rose at its fastest pace in a year, while the factory sector also beat forecasts.
Fewer people than estimated made unemployment claims, suggesting the labour market remains tight.
The data indicates the world’s top economy remained resilient, quelling the excitement sparked by last week’s news that the consumer price index slowed in April after three months of topping forecasts.
The figures came after minutes from the Fed’s May policy decision showed decision-makers wanted to keep borrowing costs elevated until they are confident prices are under control, while some even said they were willing to hike again.
Yields on government debt were higher on Friday, which usually provides headwinds for equities trading as it signals higher corporate borrowing costs.
London was additionally hit by data showing a 2.3-percent April slump in UK retail sales, days after hotter-than-expected inflation doused chances of a Bank of England rate-reduction any time soon.
– Key figures around 1530 GMT –
New York – Dow: UP 0.3 percent at 39,185.47 points
New York – S&P 500: UP 0.8 percent at 5,307.68
New York – Nasdaq Composite: UP 1.1 percent at 16,918.45
London – FTSE 100: DOWN 0.2 percent at 8,321.16 (close)
Paris – CAC 40: DOWN less than 0.1 percent at 8,321.16 (close)
Frankfurt – DAX: FLAT at 18,693.37 (close)
EURO STOXX 50: FLAT at 5,035.41 (close)
Tokyo – Nikkei 225: DOWN 1.2 percent at 38,646.11 (close)
Hong Kong – Hang Seng Index: DOWN 1.4 percent at 18,608.94 (close)
Shanghai – Composite: DOWN 0.9 percent at 3,088.87 (close)
Euro/dollar: UP at $1.0855 from $1.0815 on Thursday
Dollar/yen: UNCHANGED at 156.93 yen
Pound/dollar: UP at $1.2749 from $1.2696
Euro/pound: DOWN at 85.15 from 85.16 pence
West Texas Intermediate: UP 0.7 percent at $77.40 per barrel
Brent North Sea Crude: UP 0.6 percent at $81.87 per barrel
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© 2024 AFP