Preliminary data point to a slowdown in US economic growth

Market commentary

After a preliminary GDP report indicated that the US economy had slowed down significantly in the first quarter of 2024 and pointed to persistent inflation, US stocks closed in the red on Thursday. The Dow Jones shed 375 points, while the S&P 500 lost about 0.50%, and the Nasdaq fell 0.60%. According to the report, compared to expectations of a 2.50% increase, the US economy grew at an annualised rate of 1.60% in 1Q24. However, core PCE prices increased by 3.70%, surpassing expectations. In addition to the economic data, disappointing earnings reports from companies like Meta and IBM also weighed on market sentiment. The report heightened fears about ongoing inflationary pressures and whether the Federal Reserve would be able to deliver an interest-rate cut anytime soon. According to the CME FedWatch Tool, traders now expect only one interest rate cut this year.

European markets closed lower on Thursday, with the STOXX 50 losing 1% and the STOXX 600 falling 0.65%, as new US data raised concerns about the bloc's economic strength and the continuing rise of inflationary pressures.

Asian equity markets traded in mixed fashion on Thursday, pressured by a decline in US stock futures as Meta Platforms fell in after-hours trading following disappointing second-quarter revenue guidance. The Shanghai Composite increased 0.27% to close at 3 053, while the Shenzhen Component rose 0.14% to 9 264, as mainland stocks advanced for the second consecutive session amid improving market sentiment and China's macroeconomic outlook. The Nikkei increased by 0.10% to about 37 665 on Thursday, as investors remained cautious ahead of the Bank of Japan's policy meeting. The central bank is widely expected to keep interest rates near zero, but market participants continue to scan for hawkish signs as the yen weakened past 155 per dollar.

The local bourse closed modestly lower on Thursday, with global counterparts unsettled as investors analysed data revealing that the US economy slowed below expectations. “Anglo-American led the gainers on the local bourse on the day, jumping 18.92% to R611 after BHP Group confirmed on Thursday that it had proposed its London-listed rival regarding a potential combination to be affected by way of an arrangement valuing its rival miner at £31.1bn,” Business Day reported. The FTSE/JSE All Share Index lost 0.25% to 74 329 points, while the rand weakened 0.82% to R19.04/$, 0.62% to R20.40/€ and 0.58% to R23.78/£ at the close of business.
Thursday saw little movement in oil prices as a decline in fuel demand in the US, combined with signs of a slowing economy and concerns about a worsening conflict in the Middle East weighed on market sentiment. Brent crude futures rose to $88.11 a barrel, after falling 0.50% in the previous session. Gold gained 0.76% to $2 333.5/oz while platinum added 0.88% to $920.30/oz at 18h30.