European stock markets mostly declined on Friday, stepping back from recent record highs, influenced by investors cashing in after a week filled with central bank decisions. Meanwhile, UK stocks received a boost, appearing more favourable due to the Bank of England’s softer stance.
An unexpected interest rate reduction by the Swiss National Bank on Thursday propelled markets to new peaks, as investors realized that major central banks globally might act on rate cuts independently of the U.S. Federal Reserve. This optimism carried Wall Street to new heights overnight, with all three major indexes hitting consecutive record highs. However, the mood became more reserved on Friday.
By midday GMT, the MSCI World Equity Index had dropped slightly by 0.1% for the day, yet it was up by 1.9% for the week, marking its most significant weekly increase of the year. The week’s market confidence was bolstered not just by Switzerland’s rate cut but also by the Bank of England’s unexpectedly dovish outlook. The BoE indicated a positive economic direction that could lead to rate reductions.
Europe’s STOXX 600 and France’s CAC 40 both experienced minor declines, while London’s FTSE 100 saw a 0.5% increase, fueled by anticipations of imminent BoE rate cuts. BoE Governor Andrew Bailey suggested that further rate reductions this year were within reason.
Elsewhere, the MSCI’s Europe index and Wall Street futures experienced dips, while investors awaited comments from Fed Chair Jerome Powell. The Fed maintained that recent spikes in inflation hadn’t altered the overall scenario of gradually declining price pressures.
According to Baylee Wakefield from Aviva, the week’s end might see profit-taking due to the substantial amount of data released and the recent positive surprises. The upcoming Easter weekend could also see reduced trading activity.
The U.S. dollar index rose, set for its strongest week since the year’s start, driven by the acknowledgement that other major central banks might lower their rates quicker than the Fed, especially in light of recent robust U.S. economic data.
The euro and British pound both weakened against the dollar and Euro zone bond yields, particularly Germany’s benchmark yield, were on track for a weekly fall. The Chinese yuan weakened significantly in Asian trading, attributed to anticipated further monetary easing to support China’s economy.
Oil prices remained stable, with Brent crude slightly above $85 per barrel, influenced by a potential Gaza ceasefire, a stronger dollar, and reduced U.S. gasoline demand. Gold prices dropped to $2,174.48 per ounce after reaching a record high on Thursday. Investment in gold saw its highest inflow in nearly a year, according to Bank of America Global Research.