Frankfurt's DAX 40 index rebounded in Friday's afternoon trading, gaining about 0.3% and reaching an all-time high of 16,465 points, driven by a 3% rally in shares of BASF, despite the company's announcement of a cut to its budget for investment in plants and equipment this year. However, other major European indexes retreated, with the pan-European STOXX 600 dipping 0.3% from Thursday's 1-1/2-year high. Investors were carefully assessing policy decisions from major central banks and the latest corporate earnings reports. On the corporate front, Capgemini's Q2 revenue growth slowed more than expected, while Sanofi's quarterly sales fell short of expectations. AMS reported Q2 results in line with its expectations and Hermes' sales accelerated. Regarding the economic data, the French and Spanish economies expanded at a sustained pace in Q2, while the German GDP stagnated. At the same time, flash CPI reports pointed to a slowdown in inflation rates in both Germany and France.
The Shanghai Composite jumped 1.84% to close at a two-month high of 3,276 while the Shenzhen Component gained 1.62% to 11,100 on Friday, with mainland stocks finishing the week sharply higher amid growing optimism that Chinese authorities would follow through on their pledge to shore up the economy. China’s housing and urban development minister said the country needs more effective measures such as lower home mortgage rates and down-payment ratios for first-time home buyers to boost home purchases, urging efforts to strengthen sector recovery. Earlier this week, China’s Politburo pledged to step up policy measures to support growth, as the country’s post-pandemic recovery showed signs of slowing. Property, financial and consumer-related stocks led the advance on Friday, while technology firms traded mixed. Notable gains in the property sector include Jinke Property (7.4%), Risesun Real Estate (10%) and China Vanke (3.4%).
The BSE Sensex closed 106 points lower at 66,160 on Friday, resulting in a 0.8% loss on the week to halt a four-week winning streak as mixed corporate results and concerns of hawkish monetary policy in North America pressured key sectors of Mumbai’s exchange. Tech shares led the losses, pressured by soaring bond yields domestically and in the US after strong US GDP and labor data added hawkish pressure to the Federal Reserve. Key companies in the sector have large exposure to Western economies and have already forecasted lower profits for the remainder of the year due to lower consumer spending in North America and Europe. TCS, HCL Technologies, Tech Mahindra, and Infosys all declined more than 1%. Banks also moved sharply lower. In the meantime, Reliance Industries added 0.9% to trim losses from the week.
The Nikkei 225 Index dropped 0.4% to close at 32,759 while the broader Topix Index lost 0.2% to 2,291 on Friday, giving back some gains from the previous session, as the Bank of Japan maintained its policy of ultra-low interest rates but changed its language to make its yield curve control policy more flexible. The central bank kept guidance allowing the 10-year yield to move 0.5% around the 0% target, but stated that those would be “references” rather than “rigid limits." Japanese shares also tracked losses on Wall Street overnight as strong US economic data raised concerns that the US Federal Reserve could tighten policy further. Technology stocks led the decline, with notable losses from Advantest (-0.2%), Renesas Electronics (-54.9), SoftBank Group (-0.1%), Capcom (-6%) and Fujitsu (-3.9%). Meanwhile, Japanese banks rallied on the prospect of higher domestic rates, led by Mitsubishi UFJ (5.3%) and Sumitomo Mitsui (4.3%).
