Global Stock Markets Decline in the First Week of the New Year

In global stock markets last week, share prices fell significantly after several weeks of growth, as investors’ hopes for aggressive interest rate cuts by the U.S. central bank diminished.

On Wall Street, the Dow Jones weakened by 0.6% last week, to 37,466 points, while the S&P 500 fell by 1.5% to 4,697 points, and the Nasdaq index dropped by 3.3% to 14,524 points.

This was the first decline of these indices after nine weeks of growth, resulting from the fading euphoria regarding interest rate reductions.

In the last months of the previous year, stock prices rose sharply as investors hoped for aggressive Fed rate cuts this year.

Although estimates from Fed officials from the last meeting of the previous year indicate that they expect rate cuts three times this year, the market speculates that the Fed will cut rates six times, starting in March.

However, the minutes from the last meeting of the U.S. central bank, released on Wednesday, did not provide indications of when rate cuts might follow.

– The minutes suggest that many Fed officials advocate for keeping rates elevated for a longer period, and those who estimate that rate cuts will begin in 2024 expect them later in the year – explains Quincy Krosby, a strategist at LPL Financial.

At the money market, it was estimated at the beginning of the week that there was nearly an 80% chance that the Fed would start cutting rates as early as March, but after the release of the Fed’s minutes, those odds were reduced to less than 70%.

The report on employment in the U.S. also indicated that inflation, and thus interest rates, could remain elevated longer than expected.

In December, 216,000 new jobs were created in the world’s largest economy, more than a month earlier and more than expected.

Average hourly wages rose by 0.4% month-on-month and 4.1% year-on-year.

Among the biggest losers last week were the shares of tech giants such as Apple, Nvidia, Alphabet, and Amazon.com, which led in price growth last year.

European stock markets also saw declines last week. The London FTSE index weakened by 0.6% to 7,689 points, while the Frankfurt DAX slid by 0.9% to 16,594 points, and the Paris CAC fell by 1.6% to 7,420 points.