Amongst factors holding stocks back were hawkish comments from Federal Reserve policymakers, with chairman Jerome Powell reiterating that the central bank needed greater confidence that price pressures were coming down towards its target before cutting interest rates. Adding to inflation worries was an uptick in oil prices given rising geopolitical tensions, which could affect supply. Furthermore, ISM’s manufacturing purchasing managers’ index moved back into expansionary territory for the first time since September 2022 and input prices moved higher.
Friday saw the release of the closely watched non-farm payrolls report in which US employers added 303,000 jobs in March, much higher than expected. The unemployment rate also edged down to 3.8% while average hourly earnings rose at their slowest pace since June 2021. All eleven of the S&P 500’s sectors gained on Friday as investors welcomed signs of a buoyant economy however this was not enough to push indices into positive territory for the week. The S&P 500 ended 1% lower, with growth stocks generally faring better than value, while the Nasdaq Composite lost 0.8% and the Dow Jones Industrial Average fell 2.3%. Meanwhile, Treasury yields moved higher, jumping after the jobs report as uncertainty remains over whether the Fed will begin cutting rates in June.
European markets also ended lower in a holiday shortened week on uncertainty of the timing of rate cuts and also increasing tensions in the Middle East. The pan-European STOXX 600 declined 1.2% to snap a 10-week winning streak, dragged down by losses in utilities, retail and telecoms. Regional indices were also lower, with France’s CAC 40 and Germany’s DAX both down over 1.7%, while the UK FTSE 100 recorded a more modest loss of 0.5%. This came even after headline eurozone inflation declined by more than expected, coming in at 2.4% in March, while core inflation also cooled, raising hopes the European Central Bank will begin cutting rates in the summer.
Japanese markets weren’t able to escape the global equity slump, with the Nikkei 225 down 3.4%. This was even as the yen continued to hover around a 34-year low against the US dollar. There have been comments from ministers highlighting their readiness to respond if there were excessive moves in currency markets, although no action has been taken so far. Bucking the downbeat trend, Chinese equities managed to notch gains for a holiday shortened week, as investors focused on signs of economic improvement in the region. The Shanghai Composite advanced 0.9% and Hong Kong’s Hang Seng was up 1.1%. The official manufacturing PMI climbed back into expansionary territory in March, while the private Caixin manufacturing PMI also edged higher in its fifteenth month of expansion.
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 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.