European stock markets saw a turnaround on Thursday, with slight economic growth in the eurozone providing some relief. However, Asian indices took a hit due to concerns over further interest-rate hikes in the US and a significant slowdown in China.
Official data from the European Union’s Eurostat agency revealed that the eurozone economy only managed to achieve 0.1 percent growth in the second quarter, which was lower than the previous estimate of 0.3 percent. The agency also revised its first-quarter figures, indicating that the economy grew by 0.1 percent rather than stagnating as initially thought. Despite these revisions, experts maintain that the outlook for the eurozone remains weak.
Susannah Streeter, an analyst at Hargreaves Lansdown, warned that trading in the markets is likely to be underwhelming due to the lack of positive developments to inspire optimism. This disappointing but anticipated data adds further pressure on authorities to implement fresh stimulus measures for the world’s second-largest economy, even though there are some signs of improvement.
The recent release of figures from the Institute of Supply Management dealt a blow to hopes that the US Federal Reserve had completed its tightening cycle, following a series of positive data releases. These figures put additional upward pressure on the dollar, with particular focus on the yen, which is currently at its weakest point in 10 months. This level was last seen when Japanese officials intervened in money markets last year to stabilize the currency.
After a relatively positive couple of weeks, markets are once again grappling with gloom, a sentiment that dominated much of the summer. Traders are now considering the possibility of further tightening measures and elevated borrowing costs being maintained for an extended period to tackle inflation.
In conclusion, while European stock markets experienced a rebound due to slight economic growth in the eurozone, Asian markets were negatively impacted by concerns over the US and Chinese economies. With the outlook for the eurozone still weak, there is growing pressure on authorities to introduce fresh stimulus measures. Traders are also grappling with the possibility of more tightening and elevated borrowing costs in the face of inflation.
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