Weekly recap of world’s major stock markets; China, USA, Japan and Europe.
U.S.
Fed green signal push the markets to all time highs
Stocks rose, pushing the S&P 500 Index and Nasdaq Composite to new records, following news of Federal Reserve policymakers anticipating three interest rate cuts later in the year. Communication services and technology shares led gains, with NVIDIA reaching a record high and raising its market capitalization near USD 2.4 trillion. Apple’s potential partnership with Google parent Alphabet in offering generative AI tools also boosted sentiment. Health care and real estate shares lagged. Trading ended on Thursday in observance of Good Friday holiday.
The Fed’s policy meeting on Wednesday remained unchanged, but investors were influenced by the quarterly release of the Summary of Economic Projections. The dot plot showed that the median expectation for three rate cuts in 2024 remained unchanged, while the median expectations for interest rates in 2025 and 2026 increased by less than 25 basis points or by less than one cut.
Fed Chair Jerome Powell’s post-meeting press conference reassured investors about the inflation increase in January and February, attributed to seasonal noise. Powell also dismissed concerns about labor market cracks, such as the unexpected February unemployment rate increase, despite potential signs of market instability.
Home sales Rise
The week’s economic data suggests that the economy is expanding without reinforcing inflation pressures. February existing home sales increased by 9.5%, while a Mid-Atlantic region manufacturing gauge showed a second consecutive month of expansion. Business prices in the region fell to their lowest level since May 2020. The Federal Reserve’s news led to a decline in longer-term Treasury yields. The tax-exempt municipal bond market remained softer, with weakness among high-grade new issues affecting the secondary market. Primary issuance increased before becoming nonexistent after the Fed’s meeting. Investment-grade municipal deals struggled, while high-yield municipal deals performed well due to lower issuance volume and healthy demand from institutional buyers.
Europe
The STOXX Europe 600 Index reached a record high, climbing 1.03% due to dovish central bank signals. However, European government bond yields declined due to weak purchasing managers’ surveys and Swiss interest rate reductions.
BOE rate hold plan boost the market
The BoE kept its key interest rate at 5.25% for the fifth time, with an 8-1 vote in favor, signaling a more dovish tone. Governor Andrew Bailey expressed optimism about the economy and hinted that rate cuts could be considered in future meetings.
PMI rise inflation Slows
UK inflation has slowed to 3.4% in February, the lowest in over two years, and the composite purchasing managers’ index (PMI) expanded for a fifth consecutive month, indicating an expansion in output, following data showing a moderated but strong price pressure.
SNB cut rates but Norway hold
Swiss National Bank unexpectedly reduced borrowing costs to 1.5%, aiming to address inflation and franc appreciation, while Norway’s central bank kept its policy rate unchanged at 4.5%.
Euro bussines Activity shows gain
Eurozone business activity is picking up, according to PMI surveys, with the output of goods and services nearing stabilization in March. The composite PMI rose to a nine-month high of 49.9, indicating an expansion in activity, according to S&P Global.
Japan
Japanese equities gained due to yen weakness and the Bank of Japan’s hawkish stance, raising interest rates earlier than expected. The Nikkei 225 Index rose 5.6%, while the TOPIX Index was up 5.3%. Sentiment was also bolstered by expectations of the U.S. Federal Reserve cutting interest rates in 2024 due to inflationary conditions and economic growth prospects.
End of old era Boj ended nagative interest rates
The Bank of Japan (BoJ) has ended its negative interest rate policy, causing a decrease in Japanese government bond yields. The BoJ has set a policy rate target of 0 to 0.1%, up from -0.1%, following reports of robust pay increases in annual wage talks. The BoJ also ended its yield curve control program. Governor Kazuo Ueda confirmed that financial conditions would remain accommodative due to inflation expectations remaining below the 2% target.
CPI rise
Japanese consumer price inflation increased to a higher-than-anticipated 2.8% in February, a sharp increase from January’s 2.0% and well ahead of the Bank of Japan’s inflation target, as measured by the CPI.
Servise Sector drive the Private sector growth
The services segment continues to drive private sector growth in Japan, with activity expanding at the fastest rate in seven months in March, largely due to its strength.
China
Chinese equities fell due to concerns about the property sector slump, which offsets optimism about better-than-expected economic data. The Shanghai Composite Index declined by 0.22%, while the CSI 300 gave up 0.70%. Property investment in China fell by 9% in January-February, slowing from a 24% drop in December.
Property sales by floor area sank 20.5% in the first two months of the year, after slumping 23% in December. Despite pro-growth measures by Beijing, most investors remain cautious about China’s property sector due to high debt levels and weak homebuyer demand.
China’s economy showed signs of recovery, with industrial production increasing by 7% in January and February from 6.8% in December. Fixed-asset investment also grew by 4.2% in the first two months of the year, driven by higher infrastructure growth. Retail sales also rose, with consumption surged during the Lunar New Year holiday but easing from December’s increase. Urban unemployment was 5.3%, while the youth jobless rate increased to 15.3%.
Chinese banks maintained their one- and five-year loan prime rates at 3.45% and 3.95%, respectively, following the People’s Bank of China’s medium-term lending rate suspension.
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