Stock indices around the world continue their search for a floor following last month’s record highs. The tech-heavy Nasdaq Composite closed out a dismal week with a fittingly poor performance on Friday, losing 2.05% by the closing bell. Investors are perhaps wary of a slew of earnings reports due to drop this week, preferring to take money off the table for now. The S&P 500 had a similarly dour week, capping it off with a 0.88% loss on Friday. Far too early to call it a floor, but the Dow Jones Industrial Average at least attempted to hold ground last week, even managing to finish half a percent in the black during Friday’s session.
A quick glance at stocks around the world shows a comparable picture. In Japan, the Nikkei 225 lost over 1000 points on Friday, now down almost 10% from record highs. The Hang Seng Index in Hong Kong failed to keep any positive momentum going, finishing the week with a 1% loss on Friday. European indices are a bit more of a mixed bag but overall leave much to be desired.
The most obvious explanation for the global downturn is simply that traders are no longer expecting fresh liquidity to be pumped into markets any time soon. Since the start of the year, the narrative was that the economic rebound had cooled off to the point of justifying some level of monetary easing. Unfortunately, moving into Q2 the data were unable to back up such a stance. Inflation figures have consistently beaten expectations; the US labour market has been surprisingly resilient. Central banks around the world are on the back foot, forced to adopt a wait-and-see approach, leaving markets in limbo for the time being.
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