Markets last week – 22/03/2024

USA 

Stocks in the U.S. market rose steadily throughout the week, with both the S&P 500 Index and the Nasdaq Composite reaching new record highs. This positive momentum came as investors welcomed the news that Federal Reserve policymakers were still considering the possibility of three interest rate cuts later in the year. Particularly notable was the performance of technology shares, which led the gains, with notable increases in companies such as NVIDIA, which reached a record high, boosting its market capitalisation to nearly USD 2.4 trillion. The surge in sentiment was further fuelled by reports suggesting a potential collaboration between Apple and Google parent Alphabet in the development of generative artificial intelligence tools. While communication services and technology sectors saw significant gains, sectors like health care and real estate lagged behind. It’s worth noting that trading ended early in observance of the Good Friday holiday, concluding on Thursday. 

The driving force behind the positive sentiment was the Federal Reserve’s policy meeting, where policymakers chose to keep interest rates unchanged. Of particular interest to investors was the release of the Fed’s Summary of Economic Projections, commonly referred to as the dot plot, which revealed that the median expectation for three rate cuts in 2024 remained unchanged. Additionally, Fed Chair Jerome Powell’s post-meeting press conference further reassured investors, as he expressed confidence in the economy and downplayed concerns regarding inflation, attributing recent increases to seasonal factors. Powell’s remarks, coupled with the positive economic data, contributed to a decline in longer-term Treasury yields over the week. 

Europe

European markets saw a positive week, with the pan-European STOXX Europe 600 Index nearing a record high. The boost in sentiment was largely driven by dovish signals from central banks, coupled with positive economic data. While Germany’s DAX and Italy’s FTSE MIB recorded gains, France’s CAC 40 experienced a slight decline. The UK’s FTSE 100 surged, driven by optimism surrounding the economy.

The decline in bond yields across Europe was primarily attributed to weak German purchasing managers’ data and a reduction in Swiss interest rates. In the UK, bond yields fell following the Bank of England’s decision to maintain its key interest rate at 5.25% for the fifth consecutive time, despite a more dovish tone apparent in the 8-1 vote in favor of the decision. Governor Andrew Bailey’s comments following the meeting indicated a cautious approach, with potential rate cuts being considered for future meetings.

China

Chinese equities faced some headwinds during the week, primarily driven by concerns surrounding the property sector slump. Despite better-than-expected economic data, including industrial production and fixed-asset investment, investor confidence was dampened by ongoing challenges in the property market. Property investment slowed, with property sales also experiencing a decline. While retail sales saw an increase, the pace eased compared to the previous month. 
 
The decision by Chinese banks to leave loan prime rates unchanged was in line with market expectations, reflecting a cautious approach amid uncertain economic conditions. Analysts anticipate further policy loosening from the People’s Bank of China to support economic growth. 

Japan

Japanese equities experienced a notable uptick during the week, driven primarily by yen weakness resulting from the Bank of Japan’s unexpected hawkish tilt. Both the Nikkei 225 and the TOPIX Index rallied to record highs, fueled by expectations of future interest rate cuts by the U.S. Federal Reserve. The Bank of Japan’s decision to exit its negative interest rate policy further supported market sentiment, with Governor Kazuo Ueda affirming that financial conditions would remain accommodative despite the policy shift. 

Consumer price inflation in Japan saw a significant increase in February, surpassing expectations and exceeding the Bank of Japan’s target of 2%. This acceleration in inflation was accompanied by robust private sector growth, particularly within the services segment, indicating a strengthening economy.