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2602 2024

Market Insights

Market Insights – Week 9

Bas Kooijman

As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.

In the latest financial week, the U.S. stock market saw a predominantly positive trend, despite a shortened trading period due to the Presidents' Day holiday. Notably, the larger indices such as the S&P 500 and the Nasdaq Composite reached new intraday highs, with the Nasdaq experiencing its most significant daily increase in approximately a year. This surge was significantly influenced by NVIDIA's remarkable performance, which saw an unprecedented increase in its market value following the announcement of strong quarterly results that exceeded expectations, coupled with an optimistic full-year outlook driven by high demand for its AI-related chips.

The fixed income arena mirrored this upbeat sentiment, particularly within the high-yield bond market, where a noticeable lack of sellers led to strong demand for new issuances. This was partly fueled by the tech-driven equity rally, highlighting a robust connection between equity performance and bond market dynamics.

On the economic data front, the U.S. reported lower-than-anticipated jobless claims, indicating a persistently tight labor market. Additionally, preliminary PMI figures suggested an unexpected uptick in manufacturing activity, contributing to a cautiously optimistic economic outlook.

Federal Reserve Board Governor Christopher Waller's remarks further underscored the need for a careful approach towards interest rate adjustments, emphasizing the importance of sustained inflation progress before considering policy shifts.

Across the Atlantic, the European markets also experienced noteworthy growth, with the STOXX Europe 600 Index reaching a new record high. This was propelled by strong quarterly results from global tech companies, including NVIDIA, which ignited a worldwide rally in technology stocks. Major European indices such as France's CAC 40, Italy's FTSE MIB, and Germany's DAX witnessed significant gains, although the UK's FTSE 100 showed modest changes due to weaknesses in the mining and energy sectors.

European bond yields saw an uptick as investors adjusted their expectations regarding potential interest rate cuts, influenced by better-than-expected PMI surveys. These surveys hinted at a possible stabilization of the eurozone economy, with a notable recovery in the services sector despite ongoing contractions in some areas. Germany's economic contraction in the fourth quarter and a downward revision of its growth forecast highlighted the challenges faced by Europe's largest economy amid global uncertainties and inflation pressures.

In Asia, Japanese markets stood out with the Nikkei 225 Index hitting a new all-time high, breaking a record set over three decades ago. This milestone was achieved amidst Japan's steady growth and improving corporate profitability, although the path was not without its challenges, as evidenced by a brief losing streak halted by a rally ahead of a national holiday.

Economic indicators from Japan presented a mixed picture, with strong machinery orders and exports contrasting with a disappointing manufacturing PMI. The Bank of Japan's optimistic stance on inflation and wages added a layer of confidence, suggesting a possible shift away from prolonged ultra-loose monetary policies in the future.

In China, the equity markets rallied, buoyed by optimistic recovery prospects following an impressive Lunar New Year holiday spending spree. The Shanghai Composite and CSI 300 indices saw significant gains, reflecting renewed investor confidence. However, the mixed signals from tourism data and cautious consumer spending highlighted the complexities of China's economic recovery path. Monetary policy measures by the People's Bank of China, including a substantial cut to the five-year loan prime rate, aimed to stimulate demand within the property sector, indicating a strategic approach to bolstering economic growth amidst ongoing challenges.

This week's financial landscape illustrates a global market buoyed by technological innovation, cautious optimism in economic indicators, and strategic policy maneuvers, painting a picture of resilience and adaptability in the face of evolving challenges and opportunities.

Bas Kooijman

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