Can Global Equities Sustain the February Momentum?

Even though the markets touched new highs in February, they did experience some challenges, notably in the bond sector, which faced difficulties due to an uptick in interest rates. 

The past fortnight concluded on a positive note for major stock benchmarks, with both the Nasdaq Composite and the S&P 500 Index hitting record highs for the first time in more than two years. February wrapped up on a strong note, showcasing the S&P 500's best start to the year since 2019. The gains were widespread, with a version of the S&P 500 that equally weighs its components slightly outperforming the traditional market cap-weighted index. Yet, for the year so far, the market capweighted index has maintained a lead of 4.09 per cent, highlighting the superior performance of large tech-focused growth stocks.  [EasyDNNnews:PaidContentStart]

A key moment influencing market mood occurred with the Commerce Department revealing the core personal consumption expenditures (PCE) price index, which excludes food and energy costs, increased by 2.8 per cent for the year ending in January. This figure met expectations and helped ease worries sparked by the Labor Department's report, which showed a higher-than-anticipated rise in core consumer prices. 

The past four months have delivered the ideal combination of rising markets and low volatility for investors. February saw the S&P 500 climb by 5 per cent, marking it as one of the strongest February performances since 1980. Additionally, global equity markets reached new heights, with significant indexes like Germany's DAX, France's CAC, and Japan's Nikkei hitting all-time highs, the latter breaking a record set 34 years ago in 1989. 

In Europe, the STOXX Europe 600 Index remained steady, hovering near its peak despite investors reevaluating their expectations for European Central Bank interest rate cuts in 2024 due to persistent inflation. National stock indexes showed mixed results; Germany's DAX and Italy's FTSE MIB saw gains, whereas France's CAC 40 and the UK's FTSE 100 experienced slight declines. European government bond yields generally increased. 

Germany reported a slowdown in annual consumer price growth in February, although core inflation and service prices rose. Retail sales continued to decline, and the unemployment rate in February remained at its highest in over two years. 

Japan's stock market enjoyed a robust fortnight, with the Nikkei 225 advancing approximately 2.1 per cent, reaching new highs and capping off February with a 10 per cent gain. The TOPIX also increased, ending the week 1.8 per cent higher. 

The Bank of Japan maintained its supportive monetary policy stance. Governor Kazuo Ueda indicated it was premature to declare the 2 per cent inflation target sustainably achieved, emphasising the importance of wage growth alongside price increases before considering policy changes. 

In China, stocks rose amid anticipation of further monetary easing measures to spur growth. The Shanghai Composite Index and the CSI 300 experienced gains, while the Hang Seng Index in Hong Kong faced a slight decrease. 

Economic indicators from February present a varied picture of China's economic health. The country's official manufacturing purchasing managers index (PMI) dipped slightly to 49.1 in February, down from 49.2 in January, staying under the crucial 50-point mark that differentiates expansion from contraction. This decrease was attributed to falling production and export levels.

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