Week ending 23rd February 2024.

As you can see from the accompanying table, markets finished the week on a high note.

Nvidia’s impressive quarterly figures and optimistic guidance sparked a global market surge, propelling Japan’s Nikkei 225, US S&P 500, and Euro 600 Stoxx to record highs. The chip giant’s outstanding performance, boasting a remarkable 265% year-on-year increase in total revenue, triggered a 15% jump in its stock to an all-time high.

The robust earnings, exceeding forecasts, underscored the pivotal role of Artificial Intelligence (AI) momentum in driving stock market highs over the past year.

Japan’s Nikkei 225 reached a record high, buoyed by Nvidia’s robust results, surpassing its 1989 peak. This achievement reflects investor exuberance over the AI investment boom and marks a significant milestone for the Tokyo index. Factors such as optimism about tech stocks, overcoming historical pricing challenges, and a weakened yen attracting foreign investors played a role in this surge.

It was a positive week for US markets albeit shortened by the Presidents’ Day holiday. On Wednesday, Federal Reserve minutes from the previous policy meeting held few surprises, with investors swiftly shifting focus, particularly with Nvidia’s results looming later in the day. The minutes revealed the Fed’s lack of urgency to cut interest rates. While a general sense of optimism prevailed, officials expressed a desire for more evidence before considering policy easing. The policy rate was suggested to be at its peak for the current tightening cycle, with any reduction requiring increased confidence in sustained movement toward the 2% inflation goal.

US manufacturing PMI rose to 51.5 in February 2024, marking the strongest growth in the factory sector since September 2022. Output increased for the first time in three months, at the fastest pace since April 2023, driven by stronger client demand and a sharper uptick in new orders. Services PMI eased to 51.3 in February 2024 from 52.5 in the previous month, missing market expectations of 52. Despite a slower pace, the result indicated 13 consecutive months of expansion in the US private services sector, showcasing resilience in light of the Federal Reserve’s prolonged restrictive policy.

In the UK, there are increasing signals pointing towards an improvement in the economy’s prospects since the beginning of the year. Services PMI held steady at 54.3 in February, surpassing expectations. Increased business and consumer spending improved financial conditions, and a boost in new international business have left service providers feeling optimistic about the future.

UK consumer confidence unexpectedly fell to -21 in February 2024 from -19 in January, defying forecasts for a slight improvement to -18 and sliding for the first time in four months amid weaker readings on personal finances and the broader economic outlook. Chancellor Jeremy Hunt is scheduled to deliver the spring Budget on March 6, raising anticipation about potential tax cuts ahead of the election.

Data wise next week we are expecting Japanese inflation, US durable goods orders and the Fed’s preferred measure of inflation Core PCE as well as Irish retail sales, consumer confidence and inflation rate, China’s manufacturing PMI and Eurozone inflation.

Kate Mimnagh, Portfolio Economist

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