Global stock markets dipped on Friday following a rally sparked by the US Federal Reserve’s decision to cut interest rates. The move, which reduced the rate by 50 basis points, initially boosted investor confidence, leading to record highs for major indices. However, concerns over broader economic challenges soon pulled markets back into the red.
In the US, both the Dow Jones and the S&P 500 opened lower after posting record gains on Thursday. The Fed’s significant rate reduction, coupled with its commitment to further cuts as inflation eases, initially buoyed optimism. Yet, the aggressive rate cut also sparked fears that officials were reacting too late to potential economic headwinds.
Although these concerns lingered, Thursday’s data showing US jobless claims at their lowest since May suggested the economy might avoid a recession, possibly heading for a “soft landing.”
Mixed Performances in Global Markets
In Asia, major stock markets closed out the week mostly higher, building on Thursday’s gains. Meanwhile, the yen initially saw some strength after speculation over further monetary tightening from the Bank of Japan (BoJ). However, the currency reversed those gains after the BoJ opted not to increase borrowing costs. The BoJ’s move away from its longstanding ultra-low interest rates earlier this year had jolted markets, but Friday’s decision to pause sparked a renewed selloff of the yen, further influenced by the anticipation of continued rate cuts by the Fed.
Across Europe, market sentiment followed the US downturn. Frankfurt’s stock market fell, retracting from a record high reached the day before, while markets in Paris and London also faced declines. The UK’s FTSE 100 index was particularly affected after reports showed national debt had surpassed 100% of the country’s annual GDP. Adding to the pessimism was a sharp drop in UK consumer confidence, signaling potential headwinds for the economy.
The Bank of England’s decision to hold its interest rate steady at 5.0% on Thursday did little to buoy market sentiment, as concerns over the broader economic outlook persisted.
Gold Shines as Markets Slump
As stocks faltered, gold prices surged to a fresh record high, surpassing $2,610 an ounce. With the prospect of lower US borrowing costs making traditional safe-haven assets more attractive, investors sought refuge in gold. The precious metal’s rise underscored the ongoing caution in financial markets, as participants weighed the mixed signals coming from central banks and broader economic data.
Despite strong economic indicators like low jobless claims in the US, uncertainty around inflation, interest rate trajectories, and consumer confidence in major markets continued to drive volatility across global stock exchanges.
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