The tech heavy Nasdaq dropped 3.3% for the week while the Dow Jones moved into negative territory for the year. This was Wall Street’s third consecutive week of losses. Following a strong start to the year, stocks have been struggling to regain momentum with recent robust economic data prompting investors to reassess Federal Reserve rate hike bets.
Inflation concerns resurfaced with the Fed’s preferred inflation gauge, the personal consumption expenditures price index rising more than expected. This further stoked expectations that interest rates will remain higher for longer. In response to the PCE index release Treasury yields sold off on Friday. The yield on the two-year Treasury note hit 4.803%, its highest level since 2007, while the 10-year yield closed in on the 4% level, ending the week up at 3.948%.
Rate hike worries also weighed on European equities, with the STOXX 600 down 1.4%. In a second estimate of eurozone inflation, underlying price pressures remained with core inflation rising 5.3% in January, up from 5.2% in December. S&P Global’s PMIs for the eurozone and also the UK indicated that business activity was improving, however positive economic news fuelled bets that this would keep central banks raising interest rates.
Japan’s Nikkei 225 ended the week modestly lower with Friday’s rise managing to reverse most of the earlier losses. Stocks jumped after Kazuo Ueda, who has been nominated by the government to become the next Bank of Japan governor, told a parliamentary committee that he expected inflation to peak and so the central bank should continue with its ultra-low interest rates. This was even as Japan’s annual core consumer inflation hit a fresh 41-year high of 4.2% in January.
Hong Kong’s Hang Seng lost 3.4% however, bucking the trend, on the mainland the Shanghai Composite rose 1.1% after a strong start to the week. Sentiment was supported by the China Securities Regulatory Commission announced new rules to revive overseas listings.
Important source information: The sources for data used in this publication are EFG and Refinitiv, as at publication date, unless otherwise stated.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.