Weekly recap of world’s major stock markets; China, USA, Japan and Europe.
U.S.
All indicies closed in Green
Major indexes advanced in the shortened trading week, ending a quarter of strong gains. The S&P 500 Index reached new closing and intraday highs, with an equal-weighted version gaining 1.64%. Small-caps outperformed large-caps, and the Russell 1000 Value Index gained 1.79%. Markets were closed on Friday due to Good Friday holiday but are scheduled to reopen on Monday.
Attention on Port of Baltimore
Market activity was light ahead of the holiday weekend, with volumes expected to pick up as pension funds and institutional investors rebalance portfolios. The collapse of the Francis Scott Key Bridge in Baltimore cut off shipping access to the Port of Baltimore, and President Joe Biden pledged federal aid to reopen the port. The Commerce Department reported a 1.4% increase in durable goods orders in February, partly due to a revision in January’s steep decline.
Economic Data
Consumer confidence indicators showed mixed results in March, with the Conference Board reporting a slight decline and the University of Michigan’s gauge of sentiment rising to its highest level in 21 months. Consumers expressed optimism about the economy’s current state, but remain pessimistic about the future due to looming elections.
Bond Markets
US treasuries saw positive returns, but increased issuance impacted the tax-exempt municipal bond market. Investment-grade corporate bond market issuance ended above expectations, with deals oversubscribed. High yield primary space was active as issuers tried to bring new deals.
Europe
European markets advanced in light trading ahead of Easter, with the STOXX Europe 600 Index reaching a record high. Despite economic slowdowns, bond yields declined, and the ECB may cut rates in June, depending on wage growth.
UK on Recession
The UK’s economy entered a technical recession for the first time since early 2020, contracting by 0.3% in Q4 2023, following a 0.1% contraction in Q3.
Germany’s Weak economy
Germany’s economy is showing signs of weakness, with retail sales dropping 1.9% in February, the biggest drop in 17 months. Leading economic institutes predict a 0.1% growth in 2024, but high interest rates, weak global demand, and political uncertainty hinder hopes for a stronger recovery.
Spain’s Economic Data
Spain’s retail sales increased by 0.5% in February, reversing two months of declines. Industrial producer prices dropped 8.2% over the past 12 months, largely due to a sharp drop in energy prices.
Eurozone consumer confidence
The European Commission reported that consumer confidence in the eurozone has reached its highest level in over two years, driven by less pessimistic expectations about the economic situation. This improvement in consumer sentiment suggests stability in major purchase plans and marginal improvement in industry confidence.
Japan
Japan’s stock markets fell due to a sharply depreciating yen, potentially triggering authorities to intervene in foreign exchange markets to prop up the currency. The yen’s historic weakness has benefited large-cap exporters, who derive significant earnings from overseas.
The 10-year Japanese government bond yield dropped to 0.70% following the Bank of Japan’s historic monetary policy shift, with market expectations convergent around two more interest rate hikes within a year.
The BoJ’s Board announced the end of its negative rates policy as a step towards monetary policy normalization, despite Japan’s accommodative monetary policy and expected accommodative financial conditions.
Japan’s inbound tourism surged post-pandemic, with global travelers leveraging yen weakness, while China’s tourism lags.
China
Chinese stocks fell due to property sector downturn, with Shanghai Composite Index retreating 1.23% and CSI 300 down 0.68%, while Hang Seng Index in Hong Kong edged up 0.25%.
Chinese Premier Li Qiang announced at the China Development Forum that the country is open to foreign investment and will support growth in sectors like biological manufacturing, artificial intelligence, and data economy. The International Monetary Fund also predicted a 20% growth in China’s economy over the next 15 years.
Economic Data
China’s industrial firm profits increased 10.2% in January to February, recovering from a 2.3% decline in 2023. The increase was aided by policy support and increased overseas demand. However, deflationary pressures and the ongoing property market slump continue to impact investor sentiment.
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