Global equity markets were mixed over the week, with US equities declining while international markets were more resilient, as investors reassessed expectations for monetary policy and digested a steady flow of economic and corporate news.
Key Insights
- Global equities were mixed, with US markets weaker amid valuation concerns while international markets showed greater resilience.
- US labour market data softened, increasing volatility, even as manufacturing activity rebounded into expansion territory.
- European and UK equities held up better, supported by valuations, easing inflation pressures, and steady central bank policy.
- Central bank decisions from the ECB and BoE influenced currency markets and reinforced expectations of future rate cuts.
- Asian equities and alternative assets were volatile, with Bitcoin and precious metals reflecting broader shifts in risk sentiment.
US Equity Markets and Valuation Concerns
In the United States, equity markets moved lower as concerns emerged around valuation levels, particularly within large-cap technology stocks that have driven much of the market’s gains over the past year.
Investors appeared increasingly sensitive to earnings guidance and macroeconomic signals, leading to a pullback in growth-oriented sectors.
While economic activity remained broadly supportive, markets showed signs of fatigue following a prolonged rally, with increased volatility reflecting greater selectivity among investors.
US Labour Market and Economic Data
The week brought a large dose of US labour market data, with the majority surprising to the downside. Both private payroll and job opening numbers showed figures lower than expected whilst US jobless claims increased more than anticipated.
Despite the negative employment data activity in the US manufacturing sector showed expansion at the highest level in over 3 years, as the US purchasing managers index (PMI) moved back into expansion territory.
The mixed economic data from the US economy played its role in heightened equity market volatility during the week.
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Europe and UK: More Resilient Equity Performance
Outside the US, equity performance was comparatively stronger. European markets proved more resilient, supported by relatively attractive valuations and signs that inflation is stabilising closer to central bank targets, currently below at 1.7%.
Investors remained cautiously optimistic that economic conditions in the region are bottoming, even as growth remains subdued. UK equities were steadier, benefiting from sector composition and currency effects, though domestic economic challenges continued to weigh on sentiment.
Central Bank Decisions and Currency Markets
Currency markets were impacted by two key interest rate decision across Europe for the week. The European Central Bank (ECB) left its key deposit rate unchanged at 2.0% for a fifth consecutive meeting, as expected.
The Bank of England (BoE) voted to keep its policy rate on hold at 3.75%, having reduced it in December, in a hotly contested decision.
Four policymakers on the nine-strong Monetary Policy Committee unexpectedly voted in favour of lower borrowing costs, prompting financial markets to raise their bets on a cut as soon as March.
Asia, Emerging Markets, and Alternative Assets
Asian markets delivered mixed results. Japanese equities were supported by a stable policy backdrop and improving corporate fundamentals, while Chinese equities lagged as investors remained cautious around longer-term growth prospects despite incremental policy support.
Broader emerging market performance was mixed, reflecting the balance between global growth expectations and currency dynamics.
The recent trend of heightened precious metals price volatility continued, with gold rebounding from the previous week’s decline and silver retreating.
The price of Bitcoin fell early Friday to as low as $61,000, a level that was less than half of its record high of about $126,000 set four months earlier.
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