Team Asset Management offers its market round-up
ANOTHER wave of optimism enveloped markets last week as the release of key data points reinforced confidence among investors across global markets.
The UK’s FTSE 100 advanced 1.28%, again ahead of its US counterparts, with the S&P 500 and Nasdaq gaining 1.27% and 0.76% respectively. The week concluded with the start of the earnings season, which saw the early financial heavy-weights beat estimates, foreshadowing further positivity soon.
On Wednesday we saw the United States’ inflation figures reported, which painted a consistent picture with the previous trend. The annual inflation rate slowed for the ninth consecutive month to 5%, which was below the forecast of 5.2%, and is the lowest reading since May 2021. The core inflation rate, which excludes food and energy, implied something slightly different as it ticked up to 5.6% from 5.5% in the prior month.
This higher figure was due to stubborn services prices and lagging consumer income, leaving the average person feeling the strain.
There was also the release of minutes from the Federal Open Market Committee meeting in which members reiterated that persistent inflation and the continued robustness of the labour market would result in additional interest-rate hikes. They aim to achieve a sufficiently restrictive policy to curtail inflation to their 2% target.
The lack of recent casualties in the regional banking sector has led to a few members considering a further 0.5% increase in rates despite borrowing costs being at the highest levels since 2007. The implications of this happening would be disturbing for the wider economy and, importantly, a surprise to equity markets.
Later in the week, the latest Gross Domestic Product figure for February showed the British economy stalling as February saw zero growth, not only below estimates of a 0.1% rise but falling from an encouraging 0.4% level in January. The UK continues to find itself in a bleak situation as headline inflation hovers above 10%, and any growth stutters. Even so, the FTSE 100 index maintained strength alongside other European indexes, given their orientation to value and defensiveness at a time of continued macroeconomic uncertainty.
Friday morning saw the initiation of bank earnings, with JPMorgan leading the way with a large earnings beat, overcoming heightened concerns following the March bank panic and resulting in a considerable 7.5% gain for the shares. However, bank stock prices are set to ‘remain choppy and pressured’ as loan growth and net interest income slows soon. Citigroup and Wells Fargo also topped forecasts, which supported equity flows in the major indices.
Commodities had a relaxed week after significant moves in precious metals and oil over the past few weeks. On the other hand, cryptocurrencies again boasted a strong week, with Ethereum reaching new yearly highs, now up over 75% year to date. The week ahead will be eventful with some of the large mega-cap names – such as Netflix, Tesla and Johnson & Johnson – reporting earnings, as well as key inflation figures from the UK due to be published.