Stock markets end first half with a whimper on tepid economic data and US debate fallout

Investors are 'already busy' reviewing portfolios to align with a Trump administration's economic policies

Merchandise for Joe Biden and his presidential election rival Donald Trump at the New York Stock Exchange. The S&P 500 ended lower on Friday. Bloomberg

Global stock markets were mixed on Friday, ending an otherwise strong first half of the year on a low note amid tepid economic data and the fallout from the chaotic first US presidential debate.

The showdown between President Joe Biden and his predecessor, convicted felon Donald Trump, has had a notable influence on investor sentiment, which would be key going forward in the world's biggest economy.

Financial markets judge that Mr Trump was the victor and investors are “already busy” re-evaluating their portfolios to align with economic policies that another Trump administration might pursue, said Nigel Green, chief executive of Dubai-based financial advisory firm deVere Group.

“Investors anticipate that a Trump presidency would bring about lower corporate taxes. This would enhance corporate profitability, leading to increased stock valuations and greater investor returns,” he said.

“Trump’s previous term was marked by significant deregulation efforts, which are expected to continue. This would reduce compliance costs for businesses, allowing for greater innovation and expansion.”

Also, while tougher trade relations with China might introduce short-term volatility, it is hoped by many traders that it will lead to stronger domestic industries and a more resilient US economy, Mr Green added.

“Anticipated fiscal policies could drive bond yields higher, providing attractive opportunities for fixed-income investors.”

Higher-for-longer interest rates, meanwhile, have dented the prospects of a significant gain in oil prices. High interest rates weigh on economic growth, lowering crude demand.

The Federal Reserve on June 12 downgraded its rate-cut expectations for 2024, projecting it would lower US interest rates once this year in a clear sign that its plans to ease its restrictive monetary policy stance have been delayed.

Previous market expectations had called for three rate cuts in 2024.

The Fed left its target range unchanged at 5.25 per cent to 5.50 per cent. Updated projections from the Fed's June 11 to 12 meeting showed policymakers expect US rates will be lowered to 5.1 per cent this year.

Still, markets have rallied in the hope that the US central bank will finally pull back from its historic streak of interest rate hikes.

“The S&P 500 and Nasdaq eked out small gains as Fed rate cut hopes rose, with some investors expecting up to two rate cuts from now to the end of the year,” said Swissquote Bank senior analyst Ipek Ozkardeskaya, who also noted that the debated “favoured” Mr Trump.

On Wall Street, a sell-off dragged the benchmark S&P 500 0.4 per cent lower at the close, ending a three-week winning streak. The Dow Jones Industrial Average and tech-heavy Nasdaq Composite settled 0.7 per cent lower.

Still, the S&P 500 and Nasdaq were hovering near their all-time record highs.

Technology stocks, which have largely powered the stock market's run in 2024, were among the biggest losers, with Facebook parent Meta Platforms plunging 3 per cent, Apple declining 1.6 per cent and Microsoft, the world's most valuable company, shedding 1.3 per cent.

In Europe, London's FTSE 100 finished 0.2 per cent lower. Britain will be holding its general election on July 4, the results of which will determine the future direction of its stock market and overall economy.

Politics is also a major sticking point for Paris's CAC 40, which retreated 0.7 per cent on Friday and came before France's first round of legislative polls on Sunday. The CAC 40 has fallen 6.5 per cent since June 9, when President Emmanuel Macron dissolved the lower house of parliament.

The government of Mr Macron – widely seen to face defeat – wants to cut public spending by €20 billion ($21.4 billion) in 2024 and by at least the same amount next year, potentially putting it at odds with the EU.

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Germany's DAX inched up 0.1 per cent.

Earlier in Asia, Tokyo's Nikkei 225 rose 0.6 per cent and the Shanghai Composite added 0.7 per cent, while Hong Kong's Hang Seng Index ended flat.

In commodities, oil prices pulled back gains, amid hopes the US Fed will soon begin interest rate cuts that will help to stimulate the world's biggest economy and boost demand for crude.

Brent was virtually flat, settling 0.02 higher at $86.41 a barrel, while West Texas Intermediate shed 0.24 per cent to close at $81.54.

Gold, meanwhile, rose 0.12 per cent to close at $2,339.60 an ounce, notching a third consecutive quarterly gain, boosted by the US inflation report that raised hopes of an interest rate cut.