Can Global Equities Regain Lost Ground?

"European government bond rates increased as high inflation data sparked worries about the European Central Bank's rapid tightening of monetary policy. German 10-year sovereign bond yields gained to over 2.7 per cent, while Italian 10-year government bond yields reached new highs for 2023."

After a positive start to the year, market volatility in major equity markets seems to have returned. Despite markets moving higher in the past fortnight, the S&P 500 year-to-date returns have gone from 9.0 per cent in January to around 4.5 per cent now, about a 5 per cent correction from recent highs.
 

After experiencing their biggest weekly fall in two months, stocks ended the week higher and gained some ground last week. Shares of energy and commodities companies performed particularly well, and a rise in Facebook parent company Meta Platforms benefited communication services, while stocks in utilities underperformed. Low market volumes appeared to be caused by a lack of important triggers for most of the week. The S&P 500 Index, a statistic closely watched by technical experts and traders, continued to trade above its 200-day moving average, which looked to improve sentiment as well.
 

While markets put aside their concerns about interest rates and concentrated on indicators of a stronger economic outlook, shares in Europe increased. The pan-European STOXX Europe 600 Index gained 1.43 per cent in the past fortnight, and other important stock indices also rose. The DAX Index in Germany rose 2.42 per cent, the CAC 40 Index in France up 2.24 per cent, and the FTSE MIB Index in Italy increased by 3.11 per cent, while the FTSE 100 in the UK was up by 0.87 per cent.
 

Throughout the last week, European government bond rates increased as high inflation data sparked worries about the European Central Bank's rapid tightening of monetary policy. German 10-year sovereign bond yields gained to over 2.7 per cent, while Italian 10-year government bond yields reached new highs for 2023.

According to official figures, the euro zone's inflation rate decreased to 8.5 per cent annually in February from 8.6 per cent in January, primarily as a result of lower energy prices. But, core inflation increased from 5.3 per cent to 5.6 per cent, which gives a clearer sense of underlying price pressures because it does not include volatile food and energy prices. At 6.7 per cent in January, the unemployment rate in the eurozone was stable and quite low.
 

The Nikkei 225 Index rose by 1.73 per cent during the week, while the larger TOPIX Index increased by 1.57 per cent. Investors applauded Bank of Japan (BoJ) governor nominee Kazuo Ueda's emphasis on maintaining continuity in monetary policy as well as indications that the Chinese economy was rebounding from COVID lockdowns. Another positive was Japan's relaxation of its entry criteria for travellers from China's mainland. Gains in the market were, however, limited by uncertainty on the anticipated peak in US interest rates.
 

Ahead of the National People's Congress (NPC) meeting, Chinese equities increased for a second week as positive economic data fuelled hopes for a faster rebound than anticipated. The blue chip CSI 300 gained 1.71 per cent and the Shanghai Stock Exchange Index rose 1.87 per cent in local currency. After four weeks of losses, the benchmark Hang Seng Index in Hong Kong jumped 2.79 per cent.