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Global equities up in central bank heavy week

Market insights

3 min read

Global equities up in central bank heavy week

Last week was dominated by central banks. Kicking things off, the Bank of Japan ended its negative interest rate policy on Tuesday, shifting its rate target to 0-0.1%, up from -0.1%, as well as ending its Yield Curve Control framework.

Research Team
Research Team

The move prompted a weaker yen which in turn boosted equity markets. Although markets were closed on Wednesday, the Nikkei 225 still managed to add 5.6% for the week and hit a fresh record high. It was further boosted as core inflation rose 2.8% on an annualised basis in February, up from 2% in the previous month, raising hopes that price stability would be able to be achieved.

Wednesday saw the conclusion of the Federal Open Market Committee’s two-day policy meeting, where the interest rate was left unchanged, as widely expected. The latest dot-plot revealed that policymakers were still expecting three rate cuts this year and markets were also encouraged by comments from Federal Reserve chairman Jerome Powell, who seemed to overlook the recent uptick in inflation. All three major US equity indices hit fresh all-time highs during the week, with the tech-heavy Nasdaq Composite closing the week at a high, helped in part by chipmaker Nvidia touching a new peak on Friday. The Dow Jones Industrial Average and S&P 500 drifted slightly on Friday, with declines in retailers such as Nike and Lululemon weighing. Nevertheless, the two indices both ended 2% and 2.3% up for the week. Meanwhile Treasury yields declined on the news from the Fed.

Another central bank that remained on hold was the Bank of England (BoE). The BoE maintained its rate at 5.25% for a fifth consecutive meeting, with two members of the Monetary Policy Committee switching from previous calls for a rate hike to voting for rates to stay the same. Governor Andrew Bailey said that things were “moving in the right direction” and signalled rate cuts could occur in future meetings, helping to lift the UK FTSE 100 2.7% for the week. In addition, the latest consumer price index reading eased to 3.4% in February, its lowest rate since September 2021. Norway’s central bank also stayed on hold however, the Swiss National Bank unexpectedly cut its borrowing costs by 25 basis points, the first major developed market central bank to do so. In response the Swiss franc weakened against the US dollar. The pan-European STOXX 600 managed to hit a fresh high during the week and added 1% overall. This was its ninth consecutive winning week, its longest streak since 2012.

MSCI’s Latam equity index ended modestly higher, with most regional indices seeing similar small increases although Argentina’s Merval index surged over 14%. The Argentinian index built on gains from the prior week, continuing positivity around its primary fiscal surplus recorded for February. The Brazilian central bank cut rates for a sixth consecutive meeting, reducing its benchmark interest rate by 50 basis points to 10.75%. Meanwhile Mexico kicked off its rate cutting phase, reducing its interest rate by 25 basis points to 11%.

Bucking the upbeat trend, Chinese equity markets ended weaker, with the Shanghai Composite down 0.2%, while in Hong Kong the Hang Seng lost 1.3%. Sentiment was weighed down by ongoing concerns around the property sector which overshadowed better than expected industrial production and retail sales data.

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.