Economic market update

In February, global equity markets delivered robust returns. The MSCI World Index rose 4.7%, and Emerging Markets, 6.4%. Market confidence was supported by expectations of improving earnings growth and by growth resilience in major economies.

United States

In the US, equity markets rallied in February, with the S&P 500 gaining 5.2%. This return was across all 11 sectors of the S&P 500. It was driven by strong corporate earnings, especially from leaders in the Consumer Discretionary and Industrials sectors. Notably, Nvidia recorded a staggering 28.6% monthly gain, accounting for 20% of the S&P 500’s total return in February.

Europe and the UK

Shares in the Eurozone also gained. Improvements in Communication Services, Financials, Industrials, and Consumer Staples helped to achieve that gain. The MSCI AC Europe Index (Unhedged) returned 3.2% for February. Inflation in the Eurozone showed signs of easing, though the European Central Bank maintains a measured approach towards the timing of expected interest rate cuts.

In the UK, equity market returns were largely flat. The economy slipped into a technical recession in the latter half of 2023 (that is, 2 successive quarters of negative growth). The recession is due to weak consumer spending and the impact of higher inflation and interest rates.

China and Emerging Markets

Emerging Market equities lifted, fuelled by renewed hopes of Chinese stimulus. Returns were particularly strong in Korea and Taiwan. The Korean market benefitted in part from policy reforms and the Taiwanese market was boosted by ongoing enthusiasm for Artificial Intelligence.

Australia

The Australian equities market returned 1.0%, with the IT sector posting a 19.7% increase.

Interest rates held in February, with the Reserve Bank of Australia stating that recent inflation figures have shown consistency, although inflation does remain high.

Currency and Bonds

The 10-year Australian bond yield was up by 13 bps to 4.14%, and the US 10-year bond yield increased by 29 bps, reaching 4.24%.

In currency markets, the Australian Dollar (AUD) dropped against several major currencies. It fell by 1.5% against the US Dollar, 0.8% against the Pound Sterling, 1.1% against the Euro, but gained 0.9% against the Japanese Yen.

Read the Market Commentary for January 2024.