Last Week on Global Stock Exchanges: Largest Price Fluctuations This Year

Last week, global stock exchanges recorded the largest price fluctuations in stocks this year, with the main indices on Wall Street sharply falling on Monday by more than three percent, due to disappointing employment data and the assessment that the Fed is lagging in lowering interest rates, only to recover most of those losses by the end of the week.

The Dow Jones index weakened by 0.6 percent last week, to 39,487 points, while the S&P 500 ended the week down just 0.04 percent, at 5,344 points, and the Nasdaq down 0.18 percent, at 16,745 points.

With the sharp correction on Monday, the S&P 500 is more than 10 percent down from its peak, which means it is in correction territory, while the Nasdaq index, which had already entered correction territory a week earlier, further deepened its loss from record levels. At the same time, the fear index VIX reached levels not seen since the COVID pandemic and the major financial crisis at the beginning of last week.

The stock market decline was also linked to the halt of so-called carry trading, where investors borrow in cheap yen to buy risky assets on global stock exchanges, as Japanese monetary authorities began tightening their monetary policy. However, after significant turbulence in global capital markets on Monday, the Japanese central bank announced that it would not take further action until the market calms down.

The recovery of the indices that followed in the rest of the week was fueled by somewhat better weekly unemployment data than expected, which calmed investor fears of a recession in the US. On Thursday alone, the S&P 500 rose by 2.3 percent, recording its best daily percentage performance since November 2022, while the Dow jumped by 683 points that day, and the Nasdaq by 2.9 percent.

In fact, investors began buying stocks again on Tuesday, as if the crisis or recession were not on the horizon just a day earlier.

– Volatile trading is associated with the end of summer, when there is not much information as the earnings season wanes and does not indicate a worsening economy. A large part of the sell-off in the market came from hedge funds, not long-term investors. So it makes sense for the market to recover. All this instability is normal for August and September – says Jay Hatfield, CEO of Infrastructure Capital Advisors.

A similar pattern occurred on European stock exchanges last week – indices sharply fell on Monday, and then mostly recovered in the rest of the week. The London FTSE index ended the week at 8,168 points, or just 0.07 percent lower than the previous week. At the same time, the Frankfurt DAX rose by 0.3 percent, to 17,722 points, and the Paris CAC by 0.26 percent, to 7,269 points.