Released on Thursday, the core PCE index rose 2.8% year-on-year in January, matching expectations and prompting stocks to jump higher. Gains continued on Friday, with markets shrugging off comments from Fed policymakers who largely reiterated that they were in no rush to cut rates. This coming week chairman Jerome Powell will testify before Congress, so that may provide additional hints, while Friday will see the release of February’s job report for a further indicator on the health of the economy.
For the week, the S&P 500 managed to end at a record high, its fifteenth of the year and climbed 1%. Chipmakers and tech names continued to fuel a large part of the rise, although gains were broad-based across sectors. The tech-heavy Nasdaq was up 1.7% for the week and on Thursday it managed to hit a fresh record high for the first time since 2021. Meanwhile the Dow Jones index ended marginally lower. Treasury yields moved lower, with the 10-year yield ending at 4.19% for the week. The Institute for Supply Management’s manufacturing Purchasing Managers’ Index (PMI) fell more than expected in February, dropping to 47.8, also pressuring yields.
European markets also climbed to new heights, with the pan-European STOXX hitting an all-time high on Friday, helped by rate sensitive stocks. For the week the index only eked out a 0.2% gain, but it still extended its winning streak to six weeks. So far this year, the German DAX has been one of the top European performers and the index also ended the week at a fresh high. In contrast French and UK indices were lower for the week. Sentiment was somewhat dampened after eurozone inflation figures declined by less than expected, with an economic sentiment indicator also unexpectedly declining and the eurozone manufacturing PMI remained in contraction.
After managing to top its high after 34 years the previous week, Japan’s Nikkei 225 continued to advance, ending the week just shy of the 40,000 mark. Japanese stocks have benefited from the weaker yen and corporate governance reforms. Positive momentum was also seen in China, who saw a strong February after a weaker start to the year. Stocks found support in hopes for further stimulus measures from the government. For the week the Shanghai Composite gained 0.7%, however Hong Kong’s Hang Seng lost 0.8%. Economic data was mixed with the official PMI reading falling deeper into contraction while the private Caixin measure beat expectations and remained in expansion for a fourth month.
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.
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