Shares in Europe and Asia saw a positive trend on Thursday, following a recovery in Wall Street stocks from the previous day's sharp decline. However, oil prices experienced a decline. Most major markets, except for Seoul which saw a decline, observed an increase in benchmarks, as mainland Chinese markets remained closed for the Lunar New Year holiday.
Japan reported a contraction in its economy, with a decline of 0.4% on an annual rate in the last quarter of 2023. This marked the second consecutive quarter of contraction after a 2.9% decline in July-September. Similarly, Britain entered a technical recession in the October-December period, with its economy contracting by 0.3% compared to the previous quarter.
In European markets, the FTSE 100 in London rose by 0.2% to 7,585.16, while Germany's DAX advanced by 0.6% to 17,047.32 and the CAC 40 in Paris surged by 0.9% to 7,746.12. Meanwhile, the futures for the S&P 500 and Dow Jones Industrial Average indicated a 0.2% increase.
Japan's nominal GDP for last year totaled $4.2 trillion, equivalent to approximately 591 trillion yen, making it the world's fourth-largest economy behind the United States, China, and Germany. Germany had previously announced a GDP of $4.4 trillion in 2023, depending on the currency conversion.
The recent weakness in the Japanese economy has further dampened expectations of the Bank of Japan tightening its ultra-lax monetary policy and raising its benchmark interest rate from its longstanding level of minus 0.1%. The availability of cheap credit has been beneficial for markets. As a result, Tokyo's Nikkei 225 closed at its highest level in 34 years, with a gain of 1.2% at 38,157.94 points.
Japanese stocks have experienced significant gains, rising nearly 14% this year and almost 40% over the past year. Investors have shifted their focus to the Japanese market while pulling back from investments in China's underperforming stock exchanges. The Nikkei 225 benchmark is inching closer to its all-time high of 38,915, reached in late 1989 before the burst of Japan's financial bubble.
In Hong Kong, the Hang Seng index rose by 0.4% to 15,944.63, while Australia's S&P/ASX 200 advanced by 0.8% to 7,605.70. South Korea's Kospi, on the other hand, experienced a decline of 0.3% to 2,613.80. Meanwhile, Taiwan's Taiex jumped by 3% to reach a record high close at 18,644.57, primarily driven by TSMC, the world's largest chipmaker, which reported an 8% increase in revenue in January compared to the previous year.
Additionally, India's Sensex saw a 0.2% increase, and the SET in Bangkok closed 0.4% higher for the day.
Wall Street rebounded on Wednesday, as the S&P 500 climbed 1%, recovering more than two-thirds of its losses from Tuesday. The release of a hotter-than-expected inflation report had initially impacted expectations that the Federal Reserve would consider cutting interest rates, leading to a decline in stocks. However, the Dow Jones Industrial Average recorded a gain of 0.4% after its worst loss in almost 11 months, and the Nasdaq composite jumped by 1.3%. Notably, the Russell 2000 index, representing small-cap stocks, experienced a significant rebound of 2.4%.
The relative calm in the bond market contributed to a steadier atmosphere on Wall Street, with treasury yields easing after a sharp rise the previous day. Expectations of the Federal Reserve maintaining higher interest rates for a longer period had driven the bond market fluctuations. The central bank has already elevated its main interest rate to the highest level since 2001 in order to curb inflation and stabilize the economy.
In terms of earnings, most companies in the S&P 500 have exceeded analysts' forecasts for the last quarter of 2023. The optimistic outlook for stronger growth in 2024, driven by a robust economy, has contributed to the setting of ten new record highs for the S&P 500 so far this year.
One notable development was the surge of Lyft shares, which rose by 35.1% after a tumultuous after-hours trading session. This spike was partially driven by a typo in its latest earnings report. While Lyft reported stronger results than expected, its press release erroneously stated an expected 500 basis points (5 percentage points) improvement in a key profitability measure. The correction later revealed that the intended improvement was actually 50 basis points (0.5 percentage points). Nevertheless, Lyft's stock soared by over 60% during after-hours trading following the initial typo.
In the commodities market, US benchmark crude oil fell by 14 cents to $76.50 per barrel in electronic trading on the New York Mercantile Exchange. Similarly, Brent crude, the international standard, declined by 5 cents to $81.55 per barrel.
Finally, in currency trading, the US dollar weakened slightly against the Japanese yen, slipping to 150.09 yen from 150.46 yen. The euro, on the other hand, rose to $1.0731 from $1.0727.
