Both Microsoft and Alphabet surged on Friday after their better-than-expected earnings reports, with their combined market value rising more than $250bn. Facebook parent Meta Platforms was the only member of the Magnificent Seven to see a weekly drop, selling off after announcing it would aggressively invest in new artificial intelligence products. The S&P 500 snapped a three-week losing streak, adding 2.7%. The Dow Jones Industrial Average saw a more modest rise of 0.7% while the tech-heavy Nasdaq rose over 4%.
Economic data released painted a mixed picture. The US economy grew 1.6% in the first quarter, missing expectations and its weakest level in nearly two years. In addition, the core personal consumption expenditures (PCE) index climbed at an annualised rate of 3.7% for the quarter, sparking stagflation fears with stocks selling off in response. Stocks did however bounce back the following session on the release of monthly PCE data, where the core index rose 0.3% on a monthly basis in March, while unchanged from the prior reading on an annualised basis. This raised the case for a September rate hike from the Federal Reserve. For the week the 10-year Treasury note rose and ended at 4.67%.
The pan-European STOXX 600 index also snapped a three-week losing streak, adding 1.7%. The standout was the UK FTSE 100 which hit a fresh record high and ended the week up over 3%. Stocks were able to gain as investors focused on company earnings reports as well as there not being any further escalation in Middle East tensions. A flash estimate for the eurozone composite Purchasing Managers’ Index (PMI) ticked up to 51.4 in March, higher than expected. Meanwhile a European Central Bank survey indicated that consumers’ inflation expectations fell to their lowest level since December 2021, bolstering hopes the central bank will begin cutting rates in June.
Gains were also seen in the Japanese equity market, with the Nikkei 225 up 2.3%. Stocks were supported by the yen weakness, dropping to a fresh 34-year low versus the US dollar. The currency fell as low as ¥157.78 to the dollar after the conclusion of the Bank of Japan’s two-day policy meeting where markets were underwhelmed by the lack of clarity on future interest rate hikes. In China the Shanghai Composite was up 0.8% while Hong Kong’s Hang Seng jumped 8.8%. Much of the gains came from strong performance in tech names.
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