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April 19, 2024

Weekly Market Wrap-Up: Geopolitical Tensions, Fed Policy, and Corporate Performance

Global stock markets witnessed a significant decline over the week as investors turned to safe-haven assets amid mounting concerns regarding the escalating tensions between Iran and Israel, sparking fears of a wider regional conflict. Both the United States and the United Kingdom implemented restrictions on Russian aluminum, nickel, and copper trading on the London Metal Exchange and the Chicago Mercantile Exchange, dealing a blow to Moscow’s main sources of revenue. Federal Reserve (Fed) Chair Jerome Powell emphasized the need for patience with regards to the current tight monetary policy. European Central Bank President Christine Lagarde suggested that the German economy might be showing signs of recovery. President Joe Biden has urged the U.S. Trade Representative to triple the tariff rate on steel and aluminum imports from China. The People’s Bank of China maintained the interest rate on its one-year medium-term lending facility at 2.5% while injecting $13.82 billion into the financial system through this mechanism. Gold prices have risen for the fifth consecutive week.

Global Equity
  • The MSCI All Country World Index experienced a decline over the week following reports of Israel targeting sites in Iran, Iraq, and Syria in retaliation to Tehran’s attack against Israel.
  • Federal Reserve Chair Jerome Powell has emphasized that the restrictive rates policy requires more time to effectively yield results.
  • Samsung secured its position as the leading smartphone brand globally, while Apple faced a 10% decline in iPhone sales during the first quarter of 2024.
  • Taiwan Semiconductor Manufacturing Company (TSMC) reported higher first-quarter profit, breaking a streak of three consecutive quarters of declines. This growth was driven by a surge in demand for advanced chips amidst the global artificial intelligence boom.
  • China’s GDP grew by 5.3% in the first quarter of 2024 despite the ongoing crisis in the property sector. The government aims for an economic growth target of approximately 5% for the year, a goal that many analysts consider ambitious and potentially requiring additional stimulus measures.
  • Canada has hiked capital gains tax to raise billions for housing.
U.S. Equity
  • The S&P 500 Index had a notable slide during the week after news emerged of Israel striking locations in Iran, Iraq, and Syria in response to Tehran’s assault on Israel. 
  • Investors reduced their expectations for rate cuts by the Fed and began considering the scenario of no reductions taking place this year.
  • President Joe Biden urged the U.S. Trade Representative to triple the tariff rate on steel and aluminum imports from China.
  • House Speaker Mike Johnson faced opposition from fellow Republicans regarding his proposed aid package for Ukraine, Israel, and other allies.
  • Goldman Sachs revised its U.S. equity market forecast for the second time, raising the target to 5,200 as the S&P 500 surpassed 5,000 this month.
  • Strong performance in investment banking and the management of money and investments for wealthy clients contributed to a 28% increase in Goldman Sachs’ first-quarter profit.
  • Franklin Templeton has emerged as a significant player in private asset management, overseeing over $260 billion in alternative assets, including private credit.
  • In response to a weaker market for electric vehicles, Tesla plans to lay off more than 10% of its workforce, while two of Elon Musk’s top deputies have announced their departure from the company. In addition, Tesla has sought approval from its shareholders to relocate its state of incorporation from Delaware to Texas.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index experienced a slight increase during the week due to Israel’s strike on Iran, which led to a surge in demand for safe-haven assets.
  • Borrowing costs are still high as there are expectations that the Fed will maintain higher interest rates for a longer period. Recent data indicates a strong U.S. economy, with initial unemployment claims below projections in mid-April and the Philadelphia Fed manufacturing index reaching a two-year peak.
  • The U.S. 10-year Treasury yield slipped from 4.63% to 4.59% over the week, while the yield on the 2-year note remained steady at 4.93%.
  • The U.S. Dollar Index ended the week nearly unchanged as investors evaluate the situation in the Middle East.
Sources

HCM-030624-063.GWS

April 12, 2024

Inflation Returns to Haunt Capital Markets

The world’s capital markets were left slightly shocked as the latest inflation print from the U.S. sent tremors across borders. The S&P 500 and the Dow Jones Industrial Average both had an extremely volatile week after inflation numbers came in higher than expected, reigniting speculation of delayed rate cuts. The yields on U.S. fixed-income securities rose once again for the second week in a row. The Fed’s reiteration of its hawkish stance on interest rates and inflation led to the rise in yields. China’s economic outlook was marred once again by underwhelming data for exports and investment banking.

Global Equity
  • The MSCI All Country World Index declined during the week, due to persisting inflation concerns as well as diminishing expectations for a U.S. Federal Reserve rate cut in June. Last week, global equity funds faced an outflow of $2.9 billion. Specifically, U.S. equity funds saw outflows of $2.7 billion, while Asian equity funds witnessed outflows worth $1.9 billion.
  • In the U.S., Federal Reserve Chairperson Jerome Powell reaffirmed his outlook for three quarter-point rate cuts during the year. 
  • European stocks rose during the week due to optimism about a rate cut by the European Central Bank as hinted by a surprise rate cut by the Swiss Central Bank. Germany witnessed a rise in industrial production by 2.1%. Inflation in France was recorded at 2.4% in March due to a rise in energy and food prices. 
  • China witnessed a decline in market performance due to lower possibilities of rate cuts by the Fed amid a murky inflation outlook. As per the latest data, investment banking declined in the first quarter of 2024. Market performance was affected by the underperformance of the real estate sector and exports and rating agency Fitch revised its outlook on China to negative.
  • The Japanese market was not directly impacted by the global banking instability. Japanese Finance Minister Shunichi Suzuki stated that they are monitoring yen fluctuations and are prepared to act if currency swings become excessive. As part of its historic shift away from ultra-accommodative policy, the Bank of Japan is scaling back corporate bond purchases.
U.S. Equity
  • The S&P 500 this week saw multiple fluctuations. S&P began the week at 5,210, fell to 5,143 mid-week, and ended the week at 5,198.
  • S&P Dow Jones Indices reported that dividend payouts in the U.S. rose by a net $16 billion in the first quarter of 2024 led by large-caps, Meta, Salesforce, and Booking Holdings.
  • S&P Dow Jones also reported that large caps are weathering uncertainty and market volatility better than smaller cap companies.
  • GE Aerospace shares surged as the company announced a 250% increase in its quarterly dividend to 28 cents from 8 cents per share.
  • Mid-Week inflation shock drove major stock indexes lower, with 10 of the S&P 500’s 11 sectors falling and the Dow Jones Industrial Average losing more than 400 points.
  • Kimberly-Clark announced that it will sell its PPE Business to Ansell for $640 Million.
  • Moderna shares soared 6.2%, topping the S&P 500 as the biotech firm reported positive data from an early-stage trial of its individualized cancer.
  • The U.S. Justice Department has opened an extended antitrust investigation into Nippon Steel’s $14.1 billion takeover bid for United States Steel Corp., creating additional legal hurdles to completing the deal.
  • Alphabet neared $2 trillion market capitalization and its stock traded at a lower forward price-to-earnings ratio than Apple, Microsoft, and Nvidia.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was low over the week. The slight decline can be attributed to the uncertainty of rate cuts, higher inflation and the associated inflationary pressure.
  • The U.S. 10-year Treasury yield hit 4.57% during the week, the highest level in over 5 months. The yield on the 2-year was at 4.9%. 
  • The U.S. Dollar Index strengthened over the week as anticipations of potential interest rate cuts by the Fed weighed on the currency.
Sources

HCM-030624-063.GWS

April 5, 2024

Market Volatility Returns as Rate Cut Expectations Shift

The world’s equity markets’ seemingly unstoppable advance was slowed down as the gains by the technology sector pulled back and strong economic data weighed on predictions about inflation and rate cuts. The S&P 500 dropped quite a bit, with the biggest single day drop since February 13. Climbing oil prices and chatter about the possibility of less than three rate cuts in 2024 also had a strong influence on investor behavior during the week. The yields on U.S. fixed-income securities rose during the week. China continued its efforts to attract investment in its economy, while announcing that it will adjust its monetary policy according to the prevailing economic conditions in the near future. In Gaza, the U.S. has called for an immediate ceasefire by Israel and made it clear to Prime Minister Netanyahu that any future aid will depend on the country’s compliance with the ceasefire terms. The relations between the two countries are quite strained after the most recent exchange.

Global Equity
  • The MSCI All Country World Index declined during the week, after the increasing likelihood that rate cuts may not be as forthcoming as it had been previously thought. U.S. equities also had a rough week for primarily the same reason. 
  • Federal Reserve of Minneapolis President Neel Kashkari indicated that interest rate cuts may not be necessary this year if inflation doesn’t move closer to the 2% target. 
  • European stocks declined due to worries about postponed central bank rate cuts, while UK house prices retreated in March and high street sales fell by 2.2%. The Inflation rate in Germany dipped to 2.2% which was the lowest since May 2021. France’s inflation rate also declined, reaching its lowest level since September 2021, as it slowed to 2.3%. 
  • China registered its fastest growth in three months, driven by new businesses and expansion in the manufacturing industry. U.S. Treasury Secretary Janet Yellin has started off her official tour of China, with a discussion about overcapacity concerns and encouragement to pursue market-oriented reforms.
  • Fitch official James McCormack suggested that the Japanese economy has reached a positive cycle of wage increases and steady inflation, where wage growth will have a positive impact on economic growth. In addition, Japanese non-manufacturers’ output improved to a more than three-decade high in the first quarter.
U.S. Equity
  • The S&P 500 ended the week 200 points lower. The index recorded 49 new 52-week highs and 3 new lows, while the Nasdaq recorded 83 new highs and 46 new lows.
  • Economists predict that March non-farm payrolls will decrease to 200,000 from February’s 275,000, with an unchanged unemployment rate of 3.9%.
  • The Labor Department reported that filings for unemployment claims for the week ending March 30 climbed by 9,000 to 221,000 from the previous week’s 212,000.
  • Atlanta Fed President Raphael Bostic, a voting member of the Fed’s rate-setting committee, revised his forecast. He now expects only one interest-rate cut this year, likely occurring later than initially anticipated.
  • Walt Disney’s existing board has secured enough shareholder votes to defeat a challenge against them mounted by Nelson Peltz’s hedge fund Trian Fund Management.
  • Alphabet slipped 0.8% after a report that the Google parent has been talking to its advisers about the possibility of making an offer for HubSpot. 
  • The powerful 7.2-magnitude earthquake struck Taiwan’s eastern coast near Hualien County on April 3rd. It is likely to tighten the supply of tech components such as display panels and semiconductors.
  • Samsung Electronics is raising its investment in Texas to about $44 billion for chip development.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was relatively stable over the week. U.S. bond yields are rising due to robust economic data, which suggests the Fed may delay rate cuts to avoid inflation risks.
  • The U.S. 10-year Treasury yield hit 4.43% during the week, the highest level in over 4 months. The yield on the 2-year was at 4.67%. 
  • The U.S. Dollar Index strengthened over the week as the doubts about the timing of potential interest rate cuts by the Fed weighed on the currency.
Sources

HCM-030624-063.GWS

April 1, 2024

Global Markets Rally as US Hits Record High, Fed Hints at Rate Cuts

The world’s equity markets rallied as technology and AI-related stocks got back on their horse and put in a strong performance. The S&P 500 hit a new high supported by an increased inflow into the U.S. equity market. The Fed held rates steady and teased the idea of possibly making 3 rate cuts in 2024. The yields on U.S. fixed-income securities declined during the week, as the optimism surrounding the Fed’s announcement weighed on bond performance. After a record breaking wage hike agreement in Japan, the country’s central bank has decided to move away from its ultra accommodative monetary policy and raised interest rates for the first time in almost a decade. And finally, in Russia, the Moscow terrorist attack made international headlines and the Kremlin has pursued the perpetrators aggressively. Reports also claim that the Russian intelligence agency had received news of this attack weeks ago.

Global Equity
  • The MSCI All Country World Index went up during the week. U.S. equities also had a stellar week as the S&P 500 rose to a new record high, after adding $4 trillion to U.S. equity values. Performance was strongly aided by optimism over AI-related stocks as well.
  • The Federal Reserve kept the rate steady at 5.5% and suggested that they still plan to cut the rates this year. In economic news, the Manufacturing PMI rose to 52.5 as the output of the manufacturing sector grew. The U.S. Services PMI fell to a three-month low of 51.7 due to losses in the service sector, while the consumer confidence index was revised upward to 79.4.
  • In a week of economic announcements, two forecasting institutes cut their 2024 growth forecast for the German economy, citing weak consumption and high-interest rates. On the other hand, France’s economy is expected to eke out growth in the second quarter after stalling in the first, as higher consumer spending helps offset the drag from interest rates. 
  • The People’s Bank of China has kept its lending rate unchanged at 2.5% to tackle the headwinds from the property sector and boost the economy. President Xi met with many CEOs in Beijiing during the week trying to get them to continue investing in the economy and provided an explanation on how the sanctions against China will affect the business environment. 
  • The Bank of Japan raised its key short-term interest rate to 0.1%, its first hike in 8 years, as inflation crossed the target of 2%. This announcement came after some of Japan’s biggest companies agreed to raise wages by 5.28% for 2024, the heftiest pay hikes in 33 years.
U.S. Equity
  • The S&P 500 ended the week on a very positive note. The technology and AI-based stocks gained as the demand for chips and semiconductors increased. The CPI print for February and a jump in producer prices left investors wondering if the Federal Reserve might wait longer than expected to cut interest rates.  
  • The U.S. GDP grew at a 3.4 % annualized rate in the fourth quarter, which beat estimates of 3.2%, owing to higher consumer spending and exports.
  • Consumer confidence in the United States remained stable in March, as worries shifted from a recession to the impending presidential election.
  • The U.S. Securities and Exchange Commission is seeking fines and penalties totaling $2 billion in its case against Ripple Labs over sales of the cryptocurrency XRP. The blockchain company’s sale of XRP worth $728.9 million to hedge funds and other sophisticated buyers amounted to unlawful sales of unregistered securities.
  • Visa and Mastercard reached an estimated $30 billion settlement to limit credit and debit card fees for merchants, with some savings likely to be passed on to consumers.
  • The U.S. government has awarded contracts to buy 2.8 million barrels of oil for the government’s emergency reserve for more than $81 a barrel, $2 above the target purchase price.  
  • Reddit options launch sparked a wave of bullish bets, which some analysts said contributed to Reddit’s share price surge following its strong market debut last week. 
  • Adam Neumann, the co-founder of office-sharing giant WeWork, has offered to buy back the company for over $500 million, a company which was once valued at $47 billion.
  • Boeing CEO Dave Calhoun will step down by year-end in a broad management shakeup brought on by the planemaker’s sprawling safety crisis exacerbated by a January mid-air panel blowout on a 737 MAX plane.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index edged higher over the week. Bond yields slipped as the market factored in economic data and mixed comments from Fed officials.  
  • The U.S. GDP growth rate for Q4 2023 was revised higher to 3.4% from 3.2% in the second estimate, driven by consumer spending and non-residential business investments.  
  • The U.S. 10-year Treasury yield declined from 4.22% to 4.20% over the week, while the yield on the 2-year note dropped from 4.59% to 4.54%.    
  • The U.S. Dollar Index strengthened over the week as investors awaited key U.S. inflation data that could impact the interest rate outlook for 2024.
Sources

HCM-030624-063.GWS

March 22, 2024

A Week of Contrasts: US Equities Soar While Europe Slips and China Stumbles

The world’s equity markets had a stellar week as tech stocks delivered another solid string of results. The U.S. Federal Reserve kept rates unchanged in its latest meeting and the expectation now is that a 75 basis points cut will be planned over 3 meetings in the latter half of 2024. The European Central Bank, however, did not provide any such roadmap for its plans, saying it will act as per the situation in the economy. Coming back to technology, Apple started the week with discussions with Google to use their Gemini AI in its iPhone, but ended the week with one of the biggest lawsuits filed by the U.S. government for illegal monopolistic practices. The Bank of Japan changed its stance on monetary policy after almost 2 decades, paving the way for a change in regime. The UN security council will take a decision on a proposal for a ceasefire in Gaza. U.S. officials have been negotiating an alternative to support diplomatic efforts on the ground for a six-week truce in exchange for release of hostages.

Global Equity
  • The MSCI All Country World Index went up during the week, mainly due to the positivity in the global economy owing to the continued stellar performance by major chip manufacturing firms. A decline in corporate earnings in China offset some gains. The Federal Reserve kept rates unchanged in its latest announcement, setting the stage for rate cuts later in the year. 
  • U.S. equities rallied during the week, with chipmakers leading the way. The stock of Micron Technology rose significantly after it announced a surprise profit, while Intel received $20 billion in grants and loans from the US government to promote domestic chip production. NVIDIA unveiled its latest AI chip built on the new Blackwell architecture.
  • European equities also rose during the week owing to expected interest rate cuts by the Bank of England and due to a drop in inflation numbers which was caused by lower food and restaurant prices. While Vladimir Putin won his country’s presidential election by a landslide, Germany has slipped into recession.  
  • Chinese equities declined during the week, mainly due to an announcement by The National Financial Regulatory Administration about stricter rules for consumer finance companies aimed at containing financial risks. A decline in corporate earnings and the Chinese Yuan also contributed to the sub-standard market performance. 
  • The tech rally in the U.S. also boosted the performance of the Japanese equity market. A strong performance by Tokyo Electron and a weaker Yen that promoted the exports also aided the market. The Bank of Japan announced that they were ending their ultra-accommodative monetary policy stance and made its first rate hike in 17 years.
U.S. Equity
  • The S&P 500 rallied strongly during the week as AI-related chipmakers like Intel and Micron led the way.   
  • The Federal Reserve held steady on interest rates at the conclusion of its March meeting, and it’s sticking with its forecast for three interest rate cuts. Fed Chair Jerome Powell also noted that a strong jobs market wouldn’t deter the central bank from cutting rates. 
  • Borse Dubai, which was the top shareholder in the Nasdaq exchange, decided to sell shares worth $1.6 billion dollars and cede its position as the top shareholder to private equity firm Thoma Bravo.   
  • Lawmakers introduced a $1.2 trillion spending package to avoid a partial government shutdown for several key federal agencies and allows Congress, nearly six months into the budget year, to complete its work funding the government through September.
  • The U.S. Justice Department and more than a dozen states filed a blockbuster antitrust lawsuit against Apple accusing the giant company of illegally monopolizing the smartphone market. It is the largest in a recent string of Big Tech companies to face antitrust complaints from the U.S. government. Earlier in the week, Apple announced a possible collaboration with Google to use its Gemini AI to power AI offerings in its iPhone.
  • Reddit became the latest social media platform to successfully complete an IPO and ended their first day of trading in New York up 48%.
U.S. Fixed Income
  • The week saw positive returns for the Bloomberg U.S. Aggregate Bond Index as bond yields decreased following the Federal Reserve’s decision to uphold its guidance during the March meeting. This decision indicates that the central bank is still committed to reducing interest rates three times this year. 
  • The economic data that was published this week once again indicated a robust economy, along with a stable labor market. Officials from the Federal Reserve emphasized the importance of gaining further assurance that inflation is steadily declining towards the 2% target before considering any rate cuts. 
  • The U.S. 10-year Treasury yield declined from 4.30% to 4.24% over the week, while the yield on the 2-year bond dropped from 4.73% to 4.62%.   
  • The U.S. dollar rose over the week on expectations that other major central banks might initiate interest rate cuts before the Federal Reserve.
Sources

HCM-030624-063.GWS

March 15, 2024

Early Gains Erased by Inflation Woes

The world’s equity markets had a mixed week as early gains were wiped out after the AI and technology-related stocks pulled back due to Nvidia being sued for use of copyrighted works as well as the announcement of the latest inflation numbers in the U.S. U.S. money market funds continued to reach new record highs as investors continue to be tepid about the possibility of rate cuts. The yields on U.S. fixed-income securities rose during the week as the major indices declined during the week. The Bank of Japan continued to plan to shift away from its ultra-accommodative monetary policy after a historic wage hike was agreed to by some of Japan’s biggest companies.

Global Equity
  • The MSCI All Country World Index went slightly up during the week. Global equity funds saw a net $22.63 billion worth of inflows during the week, the largest amount in a week since the first week of February 2022.
  • The US consumer price index increased 3.2 percent in February from a year ago. The consumer price index was slightly higher than the expectations of 3.1 percent. According to the Labor Department, the consumer price index increased 0.4 percent from the previous month.
  • Donald Trump and Joe Biden have secured their position as the candidates for their respective parties for the election in late 2024. In Russia, the election for a new president gets underway on Friday but the results are somewhat a foregone conclusion with Vladimir Putin touted to retain his position. 
  • In a week of announcements, two forecasting institutes cut their 2024 growth forecast for the German economy, citing weak consumption and high interest rates. On the other hand, France’s economy is expected to eke out growth in the second quarter after stalling in the first, as higher consumer spending helps offset the drag from interest rates 
  • The People’s Bank of China has kept its lending rate steady at 2.5%, extending its cautious approach and draining cash from the banking system, using this medium-term liquidity tool for the first time since November 2022. 
  • Japan’s biggest companies agreed to raise wages by 5.28% for 2024, the heftiest pay hikes in 33 years. This move will likely ensure the Bank of Japan will shift away from a decade-long monetary stimulus program.
U.S. Equity
  • The S&P 500 ended the week somewhat flat. Tech and AI-related stocks pulled back after making over extended gains in the past weeks. The CPI print for February and a jump in producer prices left investors wondering if the Federal Reserve might wait longer than expected to cut interest rates.  
  • A Federal Reserve facility, called the Bank Term Funding Program, launched in haste a year ago amid the heavy stress triggered by Silicon Valley Bank’s collapse closed for new business, amid evidence it helped turn the tide of trouble that risked derailing the economy and upending the central bank’s efforts to lower inflation. 
  • U.S. retail sales rebounded less than expected in February, suggesting a slowdown in consumer spending in the first quarter amid rising inflation and high borrowing costs. The labor market also remains fairly tight. Fewer Americans applied for unemployment benefits last week and annual revisions to the weekly claims data showed laid-off workers were quickly finding new work
  • The United States House of Representatives has overwhelmingly passed a bill that could eventually ban the social media platform TikTok in the country, in its latest salvo against both China and big tech. The bill received resoundingly bipartisan support, with vote of 352 to 65 in favour.
  • Private equity firm Vista Equity Partners is seeking to hire investment banks for a U.S. initial public offering of Solera, a provider of software to the automotive and insurance industries. Vista, which acquired Solera for $6.5 billion in 2016, is interviewing banks as it seeks to hire IPO underwriters.
  • Electric vehicle startup Fisker has hired restructuring advisers to assist with a possible bankruptcy filing. Earlier this month, Fisker flagged going-concern risks, job cuts and a pause in investments into future projects until it secures a partnership with a manufacturer.
  • U.S. money market assets rose to a fresh record for the third straight week as total assets climbed to $6.1 trillion.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index experienced a decline over the week due to an increase in bond yields. This rise in yields was a result of investors reassessing the possibility of interest rate cuts by the Federal Reserve, which was prompted by an unexpected rise in U.S. inflation numbers.
  • The U.S. 10-year Treasury yield increased from 4.07% to 4.31% over the week, while the yield on the 2-year bond moved up from 4.47% to 4.72%.
  • The U.S. Dollar Index strengthened over the week.
Sources

HCM-030624-063.GWS

March 8, 2024

A Week of Shifts: Central Banks Signal Policy Changes, Global Markets React

In the week that was, the world’s equity markets gained ground as the world’s developed economies continued to toy with the idea of rate cuts in the offing. Global equity fund and US bond funds attracted very strong inflows for the week and mixed economic data from the US gave signs that the lagged effects of rate hikes was finally coming in. The yields on fixed-income securities declined, Eurozone bonds lost a bit of ground after Fed Chair Powell’s testimony to Congress. The Bank of Japan hinted that it plans to exit negative rates territory in March. A maritime aid corridor could start operating between Cyprus and Gaza as early as this weekend to relieve the humanitarian crisis in the war-ravaged Palestinian enclave.

Global Equity
  • The MSCI All Country World Index went up during the week. Global equity funds attracted a net $6.5 billion during the week, driven by weak U.S. manufacturing data and the increased expectations of interest rate cuts later this year.
  • Fed Chair Jerome Powell’s dovish testimony to Congress about the current stance on the country’s monetary policy was the talk of the week as he reinforced his current stance and said that any chance of a rate cut would depend on the economic data in the upcoming months. 
  • US President Joe Biden and Donald Trump won their respective primaries on Super Tuesday and lead the race in securing tickets for the 2024 elections to be held in November. President Biden’s State of the Union address also added weight to his campaign to be re-elected, while Nikki Haley pulled out of the race but did not endorse Trump. 
  • The European Central bank kept rates the same but announced a rate cut might be in the offing, after a week that saw European shares rally owing to the performance in the Energy and Financials sectors. The ECB also cut its growth and inflation estimates for the year during the week. 
  • China’s export and import growth in the January-February period beat forecasts, suggesting global trade is turning a corner in an encouraging signal for policymakers as they try to shore up a stuttering economic recovery. The country also announced a $27 billion fund to shore up investments in the global race for manufacturing state-of-the-art microchips
U.S. Equity
  • The S&P 500 slightly rose during the week. Driven by the increasing likelihood of rate cuts in the near future and the performance of technology stocks, US equities continued its positive march as the Bank of America has upgraded its year-end target for the S&P 500 to 5,400.  
  • The U.S. Treasury Department has announced new steps to boost the supply of affordable housing by unlocking billions of dollars in unspent COVID-19 aid funding to state and local governments to support a wider array of housing projects.
  • U.S. homebuying sentiment rose for a third consecutive month in February largely because a growing view among current homeowners that now is a good time to sell their house could bode well for a much-needed uptick in home listings.
  • JetBlue Airways and Spirit Airlines have scrapped a $3.8 billion merger deal after a U.S. judge blocked the deal in January on anti-competition concerns.
  • Cadence Design Systems will buy BETA CAE Systems International AG, which makes software for analyzing car and jet engine designs, for $1.24 billion in cash and stock.
  • Short sellers targeting a key regional U.S. bank exchange-traded fund have made $977 million on paper so far in 2024.
  • The U.S. Food and Drug Administration (FDA) has cleared the use of Dexcom’s new tab device, making it the first continuous glucose monitor to be available over the counter
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose over the past week. Bond yields decreased over the week, as expectations of rate cuts and an uptick in economic activity from January to February weighed on performance.
  • The U.S. 10-year Treasury yield declined from 4.22% to 4.09% over the last week, while the yield on the 2-year bond came down from 4.61% to 4.51%, causing spreads to widen.
  • Investors pumped in about $10.54 billion into U.S. bond funds during the week in their largest weekly net purchase since end-June 2021.
  • The U.S. Dollar Index declined over the week.
Sources

HCM-030624-063.GWS

March 1, 2024

US Jobs Drive Global Equity Rally Despite Geopolitical Tensions

The world’s equity markets gained ground as the corporate earnings of the biggest technology companies and positive news regarding economic indicators in the US boosted investor morale. The yields on fixed-income securities declined, Eurozone bonds began to mimic their U.S. counterparts and the month of February set a new record for corporate bond sales. The Bank of Japan continues to be hold firm on its stance till the economy achieves its inflation target, even though the country’s stock market reached record levels during the week. The tragic death of numerous Palestinians waiting for aid added more fuel to the fire against Israel and its allies for its annexation of Gaza.

Global Equity
  • The MSCI All Country World Index went up during the week, owing to the growth in jobs announced in the U.S. and solid earnings reported by major U.S. technology firms.
  • The Unites States government narrowly avoided a government shutdown, after the Democratic-majority U.S. Senate approved a short-term spending bill. The Republican-controlled House of Representatives backed it with less than 36 hours before funding would have begun to run out.
  • The European Central bank announced that Eurozone inflation had dipped during January but underlying price growth remained stubbornly high, adding to the case to hold interest rates at record highs a bit longer before starting to ease policy towards mid-year.
  • Finance leaders of the G20 countries failed to agree on a joint statement on global economic development, with divisions over the wars in Gaza and Ukraine overshadowing efforts to forge a consensus.  
  • China’s economy showed further signs of sluggish momentum as factory activity slowed, remaining in contraction territory for the 5th straight month. The property sector also continued to drag and the Chinese parliament is expected to unveil moderate stimulus plans to stabilize growth.
U.S. Equity
  • The S&P 500 slightly rose during the week. The strong economic indicators and stellar earnings from big technology companies was offset by the fears of an impending government shutdown throughout the week and possible delayed cuts in interest rates.  
  • Both Joe Biden and Donald Trump won their Michigan primaries. Even though Biden had an 81% vote, there were concerns of some dissenters who opposed the incumbent President’s stance on the conflict in the Middle East.
  • Goldman Sachs and Mubadala Investment Company have inked a landmark $1 billion agreement to invest in private credit opportunities across the Middle East region.
  • Berkshire Hathway has unveiled a cash pile of US$168 billion as of Q4, 2023.
  • Apple is reportedly ending a decade-long effort to manufacture its own electric car and the stock rallied after the announcement.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose slightly over the past week. Bond yields decreased over the week, as expectations of rate cuts and moderating inflation weighed on performance.
  • The U.S. 10-year Treasury yield declined from 4.35% to 4.31% over the last week, while the yield on the 2-year bond came down from 4.75% to 4.64%, causing spreads to widen.
  • Blue-chip companies in the US sold a record $172 billion of bonds in February after falling yields spurred investors to buy debt.
  • The U.S. Dollar Index strengthened over the week.
Sources

HCM-030624-063.GWS

February 23, 2024

Tech Powerhouse Nvidia Drives Markets Higher, US Hits New Record

The world’s equity markets continued to rally after chipmaker Nvidia posted unprecedented daily gains during the week. The effect of this surge had a global impact as equity markets rallied even though geopolitical tensions dominated headlines. The yields on fixed income securities advanced and the expectation of a rate cut in the U.S. by the Federal Reserve changed. It is now anticipated that even though there will be multiple rate cuts during the year, it may only happen during the second half of 2024. Geopolitical tensions continued in the Middle East, while the seemingly mysterious death of Alexei Navalny in captivity has raised alarm bells around the world about Russia’s autocracy and further sanctions have been announced by the U.S. against the Kremlin.

Global Equity
  • The MSCI All Country World Index rose during the week, primarily driven by the rally in the U.S. equity market.
  • The United States has announced more than 500 new sanctions against Russia over its invasion of Ukraine and the death in custody of the opposition figure Alexei Navalny.
  • Israeli Prime Minister Benjamin Netanyahu unveiled a plan for Gaza’s future post-Hamas, which includes the “complete demilitarization” of the enclave, closing off the territory’s southern border with Egypt, as well as the overhaul of Gaza’s civil administration and education systems.
  • The German and Dutch central banks posted multi-billion euro losses for 2023 and predicted more financial pain ahead. The banks are unlikely to pay dividends for years to come.
  • China’s central bank, the People’s Bank of China, has cut its key mortgage reference rate by a record amount. Its five-year loan prime rate has been cut from 4.2% to 3.95%, while keeping the one-year loan prime rate unchanged at 3.45%, as it ramps up efforts to stem a prolonged property crisis.
  • Argentina markets double down on Libertarian leader Javier Milei as investors believe that the new President can pull the country out of the present economic crisis.
U.S. Equity
  • The S&P 500 advanced during the week, reaching a new all-time high, driven by Nvidia’s impressive rally.
  • Nvidia posted revenues which were up by 265% on the booming Artificial Intelligence business, beating earnings and sales estimates.
  • Amazon has been added to the Dow Jones Industrial Average, replacing Walgreens Boots Alliance.
  • Goldman Sachs’ analysts no longer expect a U.S. interest rate cut in May and see four 25 basis point cuts this year.
  • Reddit paved the way for it to be the first major social media company to debut on the stock market in years after filing to go public.
  • U.S. money-market fund assets dropped for the second straight week on expectations that short-term rates will remain elevated for longer.
U.S. Fixed income
  • The Bloomberg U.S. Aggregate Bond Index declined over the week as bond yields increased.
  • The U.S. 10-year Treasury yield rose from 4.27% to 4.33% over the week, while the yield on the 2-year bond moved up from 4.59% to 4.69%.
  • Credit spreads tightened for both investment-grade and high-yield bonds.
Sources

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