Stock markets on both sides of the Atlantic reached all-time highs as risk-on sentiment dominated. In Europe, the Euro Stoxx 600 hit a record high after the European Central Bank reduced its policy rate for the first time since 2019 on Thursday. On Wall Street, the Nvidia legend once again fuelled the AI frenzy, sending the S&P 500 and Nasdaq to fresh highs on Wednesday.
Meanwhile, the Bank of Canada also cut the interest rate, adding pressure on the US Federal Reserve to consider a similar move next week. This could spark concerns about a new round of currency wars if the rate cut race intensifies, although most central banks are maintaining a cautious stance.
Europe
The ECB lowered the policy rate by 25 basis points, as widely expected. However, the bank indicated that future moves will follow a “data-dependent” and “meeting-by-meeting” approach. This hawkish stance sent major government bond yields higher, boosting the euro on Thursday. Both the euro and the British pound climbed against the US dollar to three-month highs this week.
Despite a hawkish rate cut by the ECB, European stock markets are set to end the week higher, snapping a two-week losing streak amid prevailing risk-on sentiment. Over the five-day trading period, the FTSE 100 rose by 0.66%, the Euro Stoxx 600 added 1.59%, the DAX advanced 0.81%, and the CAC 40 increased by 0.77%.
At a sector level, technology, and pharmaceutical stocks shone, leading the broad markets to gain. Novo Nordisk’s shares climbed 3.9% to an all-time high on Thursday on news that sales of Wegovy more than doubled in the first quarter. The Danish drug maker’s stocks rose 5.7% over the past trading days. This lifted Zealand Pharma’s shares, which jumped 6.6% on Thursday. In contrast, GSK’s shares slumped 6.2% this week amid the court ruling that the British drugmaker must face trials over whether Zantac causes cancer.
The Nvidia-driven tech rally buoyed the technology sector in Europe, with the Dutch chipmaker, ASML’s shares surging 8.4%, and SAP up 3.9% in the past five trading days. Luxury consumer stocks were also strong, with LVMH up 5.3% and Hermes rising 3.9% during the same period.
On the other hand, energy stocks experienced downbeat movements, with both Shell down 1.7% and BP falling 3.9% over a five-day trading period. Oil and gas producers' stocks were impacted by OPEC+'s decisions on output cuts last week, leading crude oil prices to hit a four-month low on Wednesday.
Wall Street
The US stock markets are poised to end the week on a positive note, propelled by Nvidia’s remarkable movements. Softened economic data, including a weaker-than-expected US manufacturing PMI and rising jobless claim data, have reinforced expectations for the Fed to initiate a rate cut sooner, thus supporting the prevailing risk-on sentiment. Investors will closely watch the May non-farm payroll data scheduled for release later today.
At a sector level, growth sectors, including telecommunication services, consumer discretionary and technology, lead gains, up 3.1%, 2.7%, and 2.6%, respectively during the past five trading days. In the meantime, energy and utilities were the biggest laggards, down 1% and 1.6% respectively.
The magnificent seven stocks all showed positive performance this week, except for Tesla. Over a five-day trading period, Nvidia's shares surged by 9.5%, with its market cap surpassing Apple's, exceeding $3 trillion, and making it the world’s second-largest company, behind Microsoft. Nvidia announced a 10-for-1 stock split and is set to resume trading on Monday. Other major tech companies in this group, including Meta, Amazon, Alphabet, Microsoft, and Apple, all saw gains ranging between 2% and 6% over the past five trading days, while Tesla's shares experienced a slight decline.
Asian Markets
Major Asian stock indices also posted gains for the week, with the Australian ASX 200 rising by 1.75%, the Japanese Nikkei 255 increasing by 0.49%, and the Chinese Hang Seng Index advancing by 2.2%
Australian banking stocks exhibited particular strength, with its largest bank, the Commonwealth Bank, seeing its shares rise for the fifth consecutive trading day and reaching an all-time high. This surge can be attributed to the cost-of-living relief measures in the Federal budget, which are anticipated to mitigate risks associated with bad loans. Conversely, shares of Australian major miners, including BHP, Rio Tinto, and Fortescue Metal, declined due to a retreat in metal prices this week.
In China, major technology and EV stocks showed strong performance, with Tencent up by 2.9%, BYD rising by 5.3%, and JD.com advancing by 2.53% over a five-day trading period. The Chinese government plans to issue 35 billion yuan ultra-long special treasury bonds in mid-June, with the aim of "boosting market confidence and expectations, and better supporting economic development," according to the Xinhua news agency.
