Weekly recap: Stocks mixed as geopolitical tensions appear to be ease

Global markets posted gains this week as fears of a wider conflict in the Middle East eased amidst potential ceasefire talks.

The technology sector, particularly the semiconductor industry, led the rally due to positive sentiment around strong demand for artificial intelligence (AI) chips.

Notably, the CBOE Volatility Index (VIX), which gauges market sentiment, remained above 20, indicating that investors are still cautious about developments in the Middle East conflict.

However, optimism was tempered by the release of hotter-than-expected US inflation data on Thursday, which led to reduced expectations for a large Federal Reserve rate cut.

This caused some markets, particularly in Europe and the US, to pare gains by the end of the week.

Europe

Major European benchmarks saw mixed results this week. The Euro Stoxx 600 rose by 0.48%, Germany’s DAX climbed 0.47%, and France’s CAC 40 remained flat over the last five trading days.

The British FTSE 100, however, fell by 0.52%, largely due to a sharp decline in mining stocks.

Sectors benefiting from China’s stimulus measures, such as mining and luxury goods, underperformed, while financial and technology shares rallied, mirroring trends on Wall Street.

Mining stocks suffered significant declines, with Rio Tinto down 4.63%, Glencore falling 2.38%, and Anglo American dropping 6.51% on a weekly basis.

Luxury stocks also struggled, with LVMH and Hermès both falling by more than 1%, and Kering and Richemont down 0.68% and 0.79%, respectively.

The defence sector retreated as tensions in the Middle East eased, with BASF SE falling 0.21%, Rheinmetall AG down 6.78%, and BAE Systems losing 3.28% over the week.

On a brighter note, major tech stocks rose, supported by positive news from AI chipmakers Nvidia and Super Micro Computer, which indicated strong demand for AI-related products.

Shares of ASML, Europe’s largest tech firm, increased by 1.14%, while SAP climbed by 3.32% over the week.

The energy sector also benefited from rising oil prices, with Shell up 1.91%, BP up 0.21%, and TotalEnergies rising 1.98% over the week.

Meanwhile, the euro weakened against both the US dollar and the British pound as expectations grew for the European Central Bank (ECB) to accelerate rate cuts.

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Recent economic data has deteriorated, particularly in the manufacturing sector, while the eurozone’s annual consumer price index (CPI) sharply cooled to 1.8% in September, falling below the ECB’s target of 2%.

Wall Street

US stock markets are set to end the week higher, buoyed by strong performances in the technology sector.

Despite a higher-than-expected consumer price index (CPI) for September, which tempered expectations of rapid Federal Reserve rate cuts, resilient economic data and easing geopolitical tensions helped to support market sentiment.

Over the past five trading days, the Dow Jones Industrial Average rose by 0.24%, the S&P 500 climbed 0.50%, and the Nasdaq Composite gained 0.81%.

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At the sector level, four out of eleven sectors posted weekly gains, with technology leading the way, up 2.21%. consumer discretionary, financials, and industrials also saw gains, while interest rate-sensitive sectors such as utilities and real estate fell 2.78% and 1.1%, respectively, as expectations for rapid rate cuts by the Fed weakened.

AI stocks regained momentum due to strong demand outlooks, with Nvidia shares jumping nearly 10% and Broadcom surging by 8% over the past five trading days.

Super Micro Computer’s shares soared 12% this week, boosted by strong GPU shipment data driven by AI demand.

On the economic front, the US headline CPI rose by 2.4% year-on-year in September, higher than the expected 2.3%, though slightly lower than August’s figure of 2.5%.

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Core CPI increased by 0.3% month-on-month, also surpassing expectations of 0.2%.

Markets are now pricing in a quarter-percentage-point rate cut in upcoming Federal Reserve meetings, rather than the 0.5% projected last month.

Asia-Pacific

In line with the Federal Reserve, the Reserve Bank of New Zealand (RBNZ) also delivered a jumbo 0.5% rate cut this week, causing the New Zealand dollar to fall sharply and boosting local stock markets, with the NZ50 up by 1.5% this week.

Chinese equities lost momentum as investors were disappointed by the Chinese government’s limited stimulus measures.

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The Hang Seng Index fell by more than 6%, while the China A50 Index dropped by 0.96%. However, major Chinese indices are still up by between 20% and 30% on a monthly basis.

Outside of China, other Asian benchmark indices rose for the week, with Japan’s Nikkei 225 up 2.02%, Australia’s ASX 200 gaining 0.77%, and South Korea’s Kospi rising 1.66%.