Global Stock Markets Fall After Two Weeks of Growth, Dollar Strengthens for the Eighth Consecutive Week

On global stock markets, share prices fell last week after two weeks of growth, as investors fear that central banks will further raise interest rates or keep them at elevated levels longer than expected.

On Wall Street, the Dow Jones fell 0.8 percent last week, to 34,576 points, while the S&P 500 slid 1.3 percent, to 4,457 points, and the Nasdaq index dropped 1.9 percent, to 13,761 points.

Negative data showing that the U.S. economy and labor market remain strong impacted the markets.

In August, activity in the U.S. service sector rose more than expected, while the number of initial jobless claims in the U.S. fell last week to 216,000, the lowest level since February.

These are good news as they show that the economy is not facing a recession. However, this is bad news as it could mean that the U.S. central bank will further raise interest rates, given that consumption, wage growth, and inflation are not ‘cooling’ sufficiently.

– The labor market report is good economic news, but in the context of monetary policy, it is bad. Investors are also concerned about possible strengthening inflationary pressures due to the recent rise in oil prices, says Sahak Manuelian, director at Wedbush Securities.

New data, however, did not change analysts’ estimates regarding interest rate increases. The vast majority expect the Fed to keep rates unchanged at the September meeting, and most believe they will not raise them further in November.

However, due to the resilience of the economy and elevated inflation, it is increasingly likely that the Fed will not start cutting rates as quickly as investors hoped.

Thus, questions remain open as to whether the Fed will raise rates again and how long they will keep them at elevated levels. Therefore, in the upcoming period, the direction of the market will largely depend on speculation regarding this.

The decline in stock indices on the largest global exchange was also a result of a sharp drop in Apple’s stock price, following news that Chinese authorities have banned the use of iPhones at work in some central government agencies. Bloomberg also reports that China plans to expand this ban to state-owned companies and agencies.

Recession Threatens the Eurozone

As a result, shares of Apple suppliers and other technology companies more exposed in China also came under pressure.

On most European exchanges, share prices also fell last week. However, the London FTSE index rose 0.2 percent, to 7,478 points, while the Frankfurt DAX slid 0.6 percent, to 15,740 points, and the Paris CAC fell 0.8 percent, to 7,240 points.

On the currency markets, the value of the dollar against a basket of currencies rose last week for the eighth consecutive week. The dollar index, which tracks the value of the U.S. dollar against six major world currencies, rose 0.7 percent last week, to 105.05 points, the highest level in six months.

At the same time, the dollar strengthened 0.75 percent against the European currency, causing the price of the euro to slide to $1.0700. The dollar’s exchange rate also rose against the Japanese currency, by 1.1 percent, to 147.80 yen.

The dollar’s strengthening for eight consecutive weeks has not been recorded since 2014, and it is attributed to data showing that the U.S. economy and labor market remain strong. The euro, on the other hand, has weakened against the dollar for the eighth consecutive week.

Although inflation in the eurozone remains high, the money market estimates that there is almost an 80 percent chance that the European Central Bank will not raise interest rates at its September meeting, as the eurozone economy faces a recession.