David Rees
A review of markets in February when Chinese shares advanced
Global stock markets gained in February with emerging markets performing strongly as Chinese shares experienced a rebound. By contrast, in fixed income yields were generally higher, meaning prices fell, as investors pushed out the timeframe for central banks to cut interest rates.
Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
US
US shares gained strongly in February, supported by some well-received corporate earnings. These included good results from some of the so-called “Magnificent Seven” companies. Gains were led by the consumer discretionary and industrials sectors, while defensive sectors underperformed.
The Federal Reserve (Fed) had held a policy-setting meeting at the very end of January. This resulted in interest rates remaining on hold at 5.25-5.5%, and Fed chair Jerome Powell indicated that a March rate cut was unlikely.
Data released in February did little to change that picture. Releases generally demonstrated ongoing economic resilience. which complicated the case for near-term interest rate cuts.
US nonfarm payroll data showed 353,000 jobs were added in January, which was ahead of market expectations. Annual inflation (as measured by the consumer price index) slowed to 3.1% in January from 3.4% in December. However, the core CPI component (which strips out food and energy prices as these can be volatile) was up 3.9% year-on-year, in line with December’s reading.
Presidential primaries were held in a few states during the month. Donald Trump won several Republican primaries, including in South Carolina and Michigan. “Super Tuesday” on 5 March will see more than a dozen states hold their primary contests.
Eurozone
Eurozone stocks also advanced but lagged the gains made by US markets. Top performing sectors included consumer discretionary, industrials and information technology. Real estate and utilities lagged; these are sectors that had rallied in late 2023 on hopes of imminent rate cuts.
In consumer discretionary there were gains from both luxury goods and automotive companies, following some strong results from key firms in those industries. Within information technology, enthusiasm around the potential of AI is continuing to drive demand. The sector was also buoyed by some strong earnings from both local and global technology companies.
Data for February showed that eurozone inflation (as measured by the consumer price index) eased to 2.6% from 2.8% in January. There were also some signs of improving business activity. The flash eurozone purchasing managers’ index (PMI) rose to 48.9 from 47.9 in January (PMI data is based on surveys of companies in the manufacturing and service sectors. A reading above 50 indicates growth while below 50 indicates contraction).
European Central Bank President Christine Lagarde continued to downplay the chances of an imminent interest rate cut, telling the European Parliament that the central bank does not want to run the risk of reversing any cuts.
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