Markets last week – 19/02/2024

USA 

NVIDIA Boosts Tech Surge as U.S. Indices Hit New Highs

Equity indexes had a positive week, led by the S&P 500 and Nasdaq hitting new highs. Despite the Russell 2000’s dip, NVIDIA’s robust earnings injected confidence, adding a record USD 277 billion to its market cap. The chipmaker reported strong quarterly revenue, raising full-year guidance due to high demand for its AI-centric chips. Various  Price traders noted solid demand in the high-yield bond market amid the equity rally. 

Weekly jobless claims defied expectations, coming in below estimates, suggesting a tight labor market. Initial February PMI indicated an uptick in manufacturing activity, with the manufacturing gauge unexpectedly rising to 51.5, its highest in 17 months. However, the services sector cooled slightly. Federal Reserve Board Governor Christopher Waller, in a Thursday speech, cautioned against rushing into rate cuts, emphasizing the need for more data on inflation and economic strength. 

Europe

STOXX Europe 600 Achieves Record Amid Global Tech Rally

In Europe, the STOXX Europe 600 reached a record level, up 1.15%, propelled by NVIDIA’s stellar results, triggering a global tech rally. Key European benchmarks, including France’s CAC 40, Italy’s FTSE MIB, and Germany’s DAX, posted gains. The UK’s FTSE 100 remained stable, influenced by weaknesses in mining and energy stocks. 

Bond yields rose as investors revised expectations on interest rate cuts following stronger-than-expected purchasing managers’ surveys. Early PMI data for February hinted at a potential stabilization in the eurozone economy, with Germany’s composite PMI declining for an eighth consecutive month. The UK’s composite PMI, however, rose for the fourth consecutive month. Final data confirmed Germany’s Q4 economic contraction, leading to a sharp cut in the growth forecast for this year. 

Japan

Nikkei 225 Hits All-Time Highs; Japan’s Economic Confidence Prevails

Japanese equities had a remarkable week, reaching all-time highs, with the Nikkei 225 breaking a 30-year record. The TOPIX also surged, reaching its highest level since February 1999. Strong machinery orders and export data supported the positive sentiment, mitigating concerns about a contracting manufacturing sector. 

While early-week data showed a decline in manufacturing PMI, the services sector remained in expansionary territory. Bank of Japan Governor Kazuo Ueda expressed confidence in moderate inflation, boosting market optimism. Attention remains on when the central bank will shift away from its negative interest rate policy. 

China

Chinese Equities Rally Post-Lunar New Year; PBoC Implements Support Measures

In China, equities rallied post-Lunar New Year, with the Shanghai Composite up 4.85% and the Hang Seng gaining 2.36%. Tourism revenue during the holiday surged 47% from 2023 levels, surpassing pre-pandemic figures. However, caution was evident as average spending per trip fell 9.5% from 2019 levels. 

In monetary policy, the People’s Bank of China injected RMB 500 billion to maintain ample liquidity. The five-year loan prime rate saw an unexpected 25 basis points cut to 3.95%, aimed at reducing mortgage rates and supporting the property sector. New home prices in 70 cities registered a seventh consecutive monthly decline, falling 0.3% sequentially in January.