Minutes from the Federal Reserve’s December meeting released on Wednesday were more hawkish than expected, dashing hopes that the central bank would begin cutting interest rates as early as March. On Friday, stocks initially sold off after a stronger-than-expected non-farm payrolls report, however they later picked up after the weaker-than-expected services Purchasing Managers’ Index (PMI) release. Despite stocks eventually managing to eke out small gains on Friday for the week they ended in negative territory.
The S&P 500 declined 1.5%, ending a nine-week winning streak, with defensive sectors outperforming while consumer discretionary and information technology sectors were the biggest laggards. One notable stock decliner was Apple which shed 5.9% for the week following a downgrade by analysts. The tech-heavy Nasdaq Composite lost 3.2% for the week while the Dow Jones was 0.6% lower. Treasury yields ticked higher, with the benchmark 10-year note ending at 4.05%.
European markets also got off to a negative start to the new year, amid less certainty about the proximity of rate cuts. For the week, the pan-European STOXX 600 ended 0.6% lower, snapping a seven-week winning streak, with the majority of regional indices experiencing losses although the Italian FTSE was an exception. Meanwhile, government bond yields advanced as odds for March rate cuts were pared back. Eurozone inflation rose to 2.9% in December however this was slightly lower-than-expected, while core inflation eased.
Japanese markets experienced mixed performance in a shortened trading week. Returning on Thursday in the first session since the deadly earthquake on New Year’s Day, the Nikkei 225 declined, dragged down by tech stocks. It bounced back slightly on Friday but still ended 0.3% lower for the week, snapping a three-week winning streak, lagging the Topix index which rose. Concerns around China’s economic recovery hampered returns in 2023 and continued to impact the market. The Shanghai Composite fell 1.5% while the Hang Seng fell 3%. Economic data was mixed with Caixin PMIs coming in above expectations although the official manufacturing PMI contracted for a third consecutive 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.
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.