Markets Reach All Time Highs With Earnings And Central Bank Revelations

In a week filled with earnings revelations, economic data and central bank deliberations, global markets experienced diverse movements. The MSCI All Country World Index (MSCI ACWI) marked a 0.9% gain, adding to its 0.6% rise in January, presenting a promising 1.9% year-to-date increase.

US Market Highlights

The US stock market surged, reaching record highs yet again. A robust rally on Friday propelled the S&P 500, Dow Jones Industrial Average and the Nasdaq Composite to unprecedented levels. Major technology players fuelled this upswing, contributing to a remarkable week for US equities.

Earnings Recap:

• Meta Platforms, Amazon and Microsoft stocks soared as they surpassed expectations.
• Alphabet slightly exceeded expectations, but a more than 6% decline in after-hours trading hinted at concerns over lower-than-expected ad revenue.
• Apple also outperformed expectations, but the stock faced a decline amid worries about sluggish sales in China.

US Economic Data: The US employment report for January significantly outpaced expectations, adding an impressive 353,000 jobs, well above the Dow Jones estimate of 185,000. Notably, wage growth saw a notable uptick, with average hourly earnings doubling the monthly estimate at 0.6%.

Central Banks:

• The Federal Reserve, led by Chairman Jerome Powell, dampened hopes of a March rate cut, emphasising the need for “greater confidence” in reaching the 2% inflation target.
• The Bank of England remained cautious, refraining from providing a specific timetable for potential rate cuts despite acknowledging a significant decline in inflation.

Market Moves:

• Global equity index futures rallied, with US averages again reaching record highs.
• US and European yields experienced fluctuations, initially moving to lower yields before a Friday surge.
• The US Dollar Index consolidated and then surged higher on Friday.
• In the commodities sector, gold futures consolidated at the lower end, while oil futures painted a more pessimistic outlook with a plunge.

Regional Insights

US Markets: The S&P 500 Index recorded a 1.4% increase, contributing to its 1.7% rise in January and a 4.1% year-to-date gain. Notably, growth stocks outperformed value shares, and large caps surpassed small caps.

European Markets: The MSCI Europe ex UK Index remained largely flat, firming 0.1%. While major European stock indexes experienced mixed results, Italy’s FTSE MIB Index notably tacked on 1.1%.

UK Markets: The FTSE 100 Index faced a slight loss of -0.3%, contributing to a -1.3% decline in January and a -1.5% year-to-date decrease. The British pound weakened against the US dollar.

Japanese Markets: Japan’s TOPIX Index and TOPIX Small Index rallied, supported by robust corporate earnings. The yen weakened against the US dollar as the US Fed pushed back against expectations of an interest rate cut in March.

Australian Markets: The S&P ASX 200 Index rose by 1.9%, overcoming hawkish commentary by Fed Chair Powell. Australian government bond yields abated on weaker data, while the Australian dollar strengthened against the US dollar.

Global Economic Landscape

The global economic scene remained dynamic, with disparities in central bank stances and divergent economic indicators. The week ahead holds promise and intrigue, with a quieter week for central banks, continued macro data analysis, and the tail end of the earnings season. Notable companies such as McDonald’s, Eli Lilly, Uber, AstraZeneca, and Pepsi will be in the spotlight.

As we navigate this landscape, the markets stand at a juncture where economic data, corporate performance, and central bank decisions intertwine. Stay tuned for the unfolding developments shaping our financial journey.

Note: Market conditions are subject to change, and this overview is based on information available at the time of writing.

Sources: Reuters, Bloomberg, CNBC and Financial Times

FAQs

1. What contributed to the record highs in the US stock market?

The US stock market reached record highs primarily due to a robust rally on Friday, propelled by major technology players. Positive earnings reports from companies like Meta Platforms, Amazon, and Microsoft also played a significant role.

2. How did the US employment report for January impact the markets?

The US employment report for January exceeded expectations, adding 353,000 jobs, well above estimates. This positive economic data, coupled with an uptick in wage growth, contributed to a surge in market confidence.

3. What factors influenced the central banks’ decisions, particularly the Federal Reserve and the Bank of England?

The Federal Reserve, led by Chairman Jerome Powell, signalled a reluctance to consider a rate cut in March, emphasizing the need for “greater confidence” in reaching the 2% inflation target. The Bank of England, while acknowledging a decline in inflation, refrained from specifying a timetable for potential rate cuts.

4. How did different regions, such as Europe, the UK, and Japan, perform in terms of their stock markets?

European markets, represented by the MSCI Europe ex UK Index, remained largely flat. The UK’s FTSE 100 Index experienced a slight loss, while Japan’s TOPIX Index and TOPIX Small Index rallied. Australia’s S&P ASX 200 Index rose despite hawkish commentary by Fed Chair Powell.

5. What are the key factors influencing the global economic landscape in the upcoming week?

The upcoming week is expected to be quieter for central banks, with a focus on macro data analysis and the tail end of the earnings season. Notable companies like McDonald’s, Eli Lilly, Uber, AstraZeneca, and Pepsi will be closely watched.

If you have specific questions or concerns about your investments, don’t hesitate to reach out to our financial advisers for personalised guidance and recommendations.