Weekly Market Update

Global Markets Navigate Mixed Signals: Earnings Surges, Inflation Divergences, and the Persistent Volatility Ahead

February 23, 2024
Global markets were mixed this week as investors digested the latest economic data and corporate earnings results.

The US markets staged a late week rally driven by strong earnings from Nvidia, which surpassed already lofty expectations. The S&P 500 and Nasdaq indexes gained over 2% for the week after having been down almost 2% midweek. European and Asian markets also moved higher late in the week, seemingly boosted by the US gains.

There are some signs of economic divergence emerging. Inflation seems to be easing faster in Europe and the UK compared to the still stubbornly high US (and Australian) core service inflation rate. This has led to speculation that the Fed may have to keep interest rates higher for longer than other central banks like the ECB and BoE, which could cut rates as early as May or June. The stronger outlook for rates in the US led to dollar weakness that reversed by week's end.

In Asia, China's efforts to support its stock market may be slowly bearing fruit as tech stocks and the overall market posted 1%+ gains. Japan also saw its Nikkei index gain 1.6% supported by the weaker yen. Australia was an outlier with its flat equity market performance this week. Mixed corporate earnings results from the likes of Cochlear, Qantas, and BHP led to the muted move.

In fixed income markets, global bond yields were mixed on the various shifts in rate hike expectations and economic outlooks. Credit spreads did grind slightly tighter supporting returns. The price of oil declined over 1% on global growth concerns, while natural gas prices spiked 7% on cold weather forecasts. Gold prices climbed back above $1,830/oz.

While the late week rally seems encouraging, the very mixed signals on economic growth, inflation trends, and central bank policies mean volatility will likely persist in the near-term. Investors may have to brace for further market swings as the divergent scenarios across regions play out.

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