Markets last week – 15/03/2024

USA 

Stocks ended the week mostly lower as investors balanced surprising inflation data against signs of cooling consumer spending. The Dow Jones Industrial Average hit a record high midweek before slipping back. Energy shares saw gains driven by higher oil prices, while tech stocks lagged due to weakness in companies like NVIDIA. The CPI rose as expected, but producer prices surprised analysts by doubling consensus estimates. Retail sales missed expectations, hinting at consumer caution. Bond yields rose in response to the inflation data, touching their highest levels since February. Investment-grade and high-yield bonds saw strong demand amid rising rates. Equities retreated alongside bonds following the producer price data. 

Europe

European markets saw gains, with the STOXX Europe 600 Index rising for an eighth consecutive week. Hopes of ECB rate cuts in June boosted sentiment. UK unemployment unexpectedly rose, while GDP showed signs of recovery. The unemployment rate in the UK unexpectedly rose from 3.8% to 3.9% in the three months through January. Wage growth, excluding bonuses, fell to 6.1%, the lowest level since mid-2022. Gross domestic product (GDP) increased 0.2% sequentially in January, bolstered by expansion of retailing and wholesaling. 

Japan

Japanese markets posted losses, with the Nikkei 225 and TOPIX Index both declining. Speculation rose regarding the BoJ ending its negative interest rate policy, driving bond yields higher. Revised GDP data showed Japan avoided a technical recession in the final quarter of 2023. 

The BoJ’s ultra-accommodative policy has weighed heavily on the yen, boosting many of the country’s large-cap exporters who derive their revenues from overseas. The yen weakened over the week, to the high end of the JPY 148 against the USD range, from around JPY 147 at the end of the previous week. 

China

Chinese markets rose despite economic concerns. Consumer prices increased, while producer prices continued to decline, indicating ongoing deflationary pressures. The PBOC injected liquidity into the banking system, aiming to support economic growth. The government pledges to boost spending aimed at stimulating consumer and business activity. Property prices continued to decline, with Moody’s downgrade of China Vanke adding to sector woes. 

In February, China witnessed a continued decline in new home prices for the eighth consecutive month, as reported by the statistics bureau. Despite efforts from Beijing to stimulate demand, there were no indications of a reversal in the ongoing property crisis. Moody’s recent decision to downgrade the credit rating of China Vanke, a major developer in the country, from investment-grade to junk status, and the subsequent review of all its ratings for further downgrade, is expected to deepen scepticism surrounding China’s real estate sector.