Weekly Recap: European markets see a resurgence on tech optimism

Global stock markets faced sell-offs this week, as Wall Street’s rally began losing momentum amidst fading optimism around Trump. European markets managed a modest rebound on Thursday, spurred by positive outlooks from tech giants ASML and Siemens.

Global markets appear likely to end the week on a sour note as Wall Street’s Trump-led rally began to falter.

Despite a brief rally in Europe following upbeat guidance from technology companies, major European indices remain in negative territory for the week.

The US dollar has strengthened further, exerting pressure on other major currencies, most notably the euro. Commodities, too, continued their downtrend, as surging US government bond yields and lacklustre Chinese stimulus measures undermined prices.

Bitcoin reached a fresh high earlier in the week but saw a retreat by Thursday, indicating a wave of potential profit-taking.

Europe

European stock markets experienced mixed results over the week, with the pan-European Stoxx 600 index declining 0.08%, Germany’s DAX losing 0.25%, France’s CAC 40 slipping by 0.37%, and the UK’s FTSE 100 ending the week relatively unchanged.

The technology sector notably rebounded on Thursday, recouping some of the week’s broader losses and providing a boost to European equities. ASML, Europe’s largest technology firm, rallied 7% on the day – the company’s best daily gain since July -following CEO Christophe Fouquet’s encouraging remarks on the company’s outlook.

Fouquet cited an anticipated rise in AI demand, projecting sales revenue growth of between 8% and 14% annually over the next five years. Meanwhile, Siemens saw its shares climb nearly 5% to an all-time high, buoyed by a robust quarterly earnings report and an expected annual growth rate of 5-7%. ASML and Siemens stocks have thus far gained 8.1% and 2.8% for the week, respectively.

Conversely, mining stocks continued to face headwinds, suffering from weak commodity prices driven by a strong US dollar and lingering concerns over China’s economic outlook. Shares of Rio Tinto declined by 4.26%, Anglo American slumped 5.4%, and Glencore’s stock dropped 5.1%.

Analysts expect this downtrend to persist, as China’s economic challenges continue to exert pressure on demand for industrial commodities.

Kyle Rodd, senior market analyst at Capital.com, remarked in a note: “Absent significantly stronger support from China, the balance of risks appears tilted downward for commodity prices.”

The euro’s value continued to fall against the US dollar as the Trump trade gathered momentum, compounded by rising US inflation data. The EUR/USD currency pair dipped just above 1.05 – the lowest since October 2023 – reflecting a nearly 6% depreciation against the dollar since September.

In the United Kingdom, wage growth has remained robust, increasing by 4.3% over the three months ending in September, up sharply from 3.9% in the previous period.

Unemployment, meanwhile, has crept up to 4.3% from 4%, with persistent wage inflation likely to bolster the Bank of England’s hawkish stance, despite two rate cuts earlier this year.

Wall Street

US stock markets have largely ended the week in negative territory, with fading Trump-related optimism and Federal Reserve Chair Jerome Powell’s indication that a rate reduction is not imminent weighing on sentiment. For the week, the Dow Jones Industrial Average slipped by 0.54%, the S&P 500 lost 0.77%, and the Nasdaq Composite declined by 0.93%.

At the sector level, eight of 11 sectors saw losses this week, with healthcare and industrials leading declines at 3.16% and 2.89%, respectively.

The energy, consumer discretionary, and financial sectors outperformed, each rising over 1%. The technology sector pulled back, with several stocks among the “Magnificent Seven” experiencing profit-taking.

The US dollar index climbed to 106.81, marking its highest level since November 2022, as US government bond yields continued their ascent. October’s CPI revealed an annual inflation rate of 2.6%, up from 2.4% in September, with core inflation ticking up by 0.3% month-over-month. This persistence in inflation underscores the likelihood of further rate stability, supporting the dollar’s strength.

Asia-Pacific

The Asia-Pacific region’s stock markets followed the global trend, mostly recording losses throughout the week.

China’s latest stimulus announcements fell short of market expectations, lacking the direct financial injections many had hoped for. Despite mixed economic indicators – such as a rise in retail sales to the fastest pace since February and weaker-than-expected industrial production – markets remained subdued. The Hang Seng Index saw a sharp 6.2% weekly decline, indicating that lingering fears about Trump’s potential tariffs continue to weigh on investor sentiment.

Elsewhere in the region, other major indices also posted losses for the week: Australia’s ASX 200 declined 0.12%, Japan’s Nikkei 225 fell 2.18%, and South Korea’s KOSPI index slumped by 5.48%.