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February 2024 market review: International
Employment data surpassed expectations, painting a strong picture for the US labour market during February 2024.
The S&P 500 reached record highs as earnings results rolled in. This is a narrow equity rally which continues to be driven by the technology sector; the S&P IT index is up 12% year to date, after rising 56% in 2023.
Employment data surpassed expectations, painting a strong picture for the US labour market. US inflation also came in higher than expected. This, combined with cautious comments from US Federal Reserve (US Fed) chair Powell, further cooled market expectations for a March interest rate cut.
With markets recalibrating the timing of interest rate cuts, the US dollar gained (0,9%) on a trade weighted basis, while the Bloomberg Global Aggregate Bond index moderated by 1,3% in February, bringing the year-to- date decline to 2,6%.
Chinese equity markets rallied with the announcement that a domestic sovereign wealth fund would be increasing purchases of local index funds i.e. government stimulus of the stock market via significant purchases of local stocks for “national service”. Chinese equity markets returned 6,5% over the month, with the MSCI Emerging Markets index returning 4,8%.
Concerns remain regarding the outlook for the Chinese economy, however. Chinese inflation figures remained in deflationary territory for a fourth month, with headline CPI printing at -0,8% y-o-y for January from -0,3% the prior month. Industrial metals price movements reflect this sentiment, with resources weakening over the month, impacting those markets with greater exposure such as the FTSE 100 and South African indices. Notably iron ore prices are 8.0% lower YTD and copper 1.6% lower.
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