Semiconductors rallied, in particular Nvidia and Advanced Micro Devices which touched record highs, following an upbeat earnings report from Taiwan Semiconductor Manufacturing Co, boosting optimism around artificial intelligence. For the week the S&P 500 ended 1.2% higher and managed to set a fresh record high, last set in January 2022. The Dow Jones also touched a record and added 0.7% while the Nasdaq Composite rose 2.3%, although remains shy of its all-time peak.
Equity gains came even as investor enthusiasm over interest rate cuts faded, as recent comments from policymakers have indicated that the Federal Reserve may not move as fast as markets expected. According to CME Group’s FedWatch tool, traders are now pricing in a 56% chance of a quarter point rate cut in March. Treasury yields drifted higher for the week in response, with the yield on the 10-year note ending back up above 4%.
The prospect of rate cuts not coming as soon as expected weighed on European markets. European Central Bank president, Christine Lagarde signalled that rate cuts would likely begin in the summer. For the week the pan-European STOXX 600 ended 1.6% lower, with regional indices facing declines. Germany’s DAX was down 0.9%, with a preliminary reading of GDP indicating that the economy contracting 0.3% in the fourth quarter, although an upward revision to the third quarter figure meant that the economy avoided a technical recession. The UK FTSE 100 dropped over 2%, with the inflation rate unexpectedly picking back up in December, while retail sales saw their steepest monthly drop since January 2021.
In Japan, the Nikkei 225 managed to hit a fresh 34-year high and was up 1.1% on the week, supported by a weak yen. The currency moved lower against the US dollar as odds for the Bank of Japan to move away from its negative interest rate policy diminished amid easing inflation. Chinese markets were once again lower. The Shanghai Composite lost 1.7%, down three consecutive weeks, while the Hang Seng sank over 5%. China’s economy expanded 5.2% for the fourth quarter and also for the full year, meeting the government’s growth target, however, there remains areas of weakness in the economy.
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This document has been produced by the EFG Harris Allday research team utilising data from documents 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.