Global Stock Markets Unstable, Focus on Inflation and Interest Rates

Last week, global stock markets traded very uncertainly as investors speculated on when central banks would raise interest rates due to rising oil prices and increased inflation.

On Wall Street last week, the Dow Jones index weakened by 0.3 percent to 53,414 points, while the S&P 500 rose by 0.1 percent to 7,718 points, and the Nasdaq by 0.4 percent to 26,506 points.

At the beginning of the week, these indices were under pressure as the conflict between the US and Iran showed no signs of ending. As a result, oil prices rose, which could further fuel already elevated inflation. This would compel central banks to raise interest rates.

However, a strong market rally occurred on Thursday after FED Governor Christopher Waller told Reuters that he would be inclined to keep key interest rates at their current level if upcoming data confirms a easing of price pressures.

Although he also noted that he would support a rate increase if inflation does not begin to slow, following Waller’s comments, market estimates regarding the likelihood of the FED raising interest rates at its September meeting fell to about 50 percent, down from 63 percent previously.

However, by Friday, those prospects had risen again, and stock indices fell as the US employment report was better than expected.

In August, the number of employed increased by 162,000, three times more than analysts had expected. This indicates that the labor market is solid, which opens up room for the FED to raise rates.

In the US, inflation has long been significantly above the target level of around two percent, so the question is not whether the central bank will raise rates, but when it will do so.

Investors hope that this will not happen in September, and there are also some optimistic views that rates will not be raised at all.

Last week, the New Zealand central bank raised interest rates, and the market estimates that the European Central Bank will raise rates for the second time this year at its meeting next week.

As a result, stock prices fell on most European exchanges last week. However, the London FTSE index strengthened by 0.1 percent to 10,831 points, while the Frankfurt DAX slid nearly two percent to 26,046 points, and the Paris CAC by 1.5 percent to 8,278 points.

Dollar Strengthens Against Euro, Sharply Falls Against Japanese Yen

On global markets, the value of the dollar against a basket of currencies fell last week, with the dollar rising against the euro but sharply falling against the Japanese yen.

The dollar index, which shows the value of the US dollar against six major world currencies, weakened by 0.5 percent last week to 99.16 points.

At the same time, the dollar strengthened by 0.3 percent against the European currency, bringing the euro price down to 1.1615 dollars.

However, the US currency weakened against the Japanese yen by 2.4 percent to 156.25 yen.

The sharp decline of the dollar against the yen is a result of warnings from Japanese authorities that they might intervene in the market again if necessary, as well as analysts’ estimates that the Japanese central bank will soon raise interest rates.

There is also speculation that Japanese investors, including insurance companies and pension funds, may withdraw some investments from US bonds and invest in Japanese ones as yields on Japanese bonds are rising.

ZSE: Crobex Indices Fell Last Week, Focus on Končar and Atlantic Group

On the Zagreb Stock Exchange last week, Crobex indices fell, losing all gains from the previous week, with the focus on the shares of Končar and Atlantic Group.

The Crobex index dropped by 0.89 percent to 4,390 points, while Crobex10 fell by 0.41 percent to 2,856 points.

Among sector indices, Crobexkonstrukt fell the most, by 1.69 percent, while only Crobexturist rose by 0.2 percent.

Regular trading reached 6.7 million euros, approximately 1.1 million more than the previous week.

Additionally, block trading achieved a turnover of 969 thousand euros, in transactions with two stocks – Luka Rijeka (612 thousand euros) and Atlantic Group (357 thousand euros).

In regular trading, the stock of Končar had the highest turnover of 1.43 million euros, with its price stagnating at 1,034 euros.

Following closely was the stock of Atlantic Group with a turnover of nearly 960 thousand euros, also stagnating at a price of 51 euros.

Atlantic Group reported on Monday that Atlantic Droga Kolinska has completed the acquisition of the Slovenian company Osem, which has the Kekec brand, with a total acquisition and planned investment value exceeding 40 million euros.

The preferred stock of Adris Group was also in focus for investors, with a turnover of 512 thousand euros, and a price drop of 1.45 percent to 102 euros.

The stock of Auto Hrvatska had a slightly higher turnover of 455 thousand euros, with a price increase of 1.54 percent to 264 euros.

Among the more liquid stocks, the price of Helios Faros fell the most, by 5.3 percent to 1.25 euros, and Čakovečki Mlinovi by 4.33 percent to 9.95 euros.

On the other hand, the stocks of Arena Hospitality Group rose the most, by 7.5 percent to 43 euros, and Lošinjska Plovidba Holding by 3.31 percent to 25 euros.

A total of 51 stocks were traded on the ZSE last week, with 13 prices rising, 26 falling, and 12 stagnating.