Written by Ashwin Gurung

In the US, The Federal Reserve’s (the Fed) preferred inflation measure, the core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, rose in line with market expectations by 0.3% month-over-month. The annual PCE inflation rate for February remained steady at 2.5%, also in line with market expectations. The Fed Chair, Jerome Powell, stated that he is more confident that inflation is falling towards their 2% target, and that the Fed expects to cut interest rates this year. However, Powell acknowledged the strength of the current economy and the labour market, emphasising the need for caution in their decision-making. Additionally, the S&P 500 hit a new high over the week, returning +0.2% in GBP terms. This increase was largely driven by companies outside of the usual dominant performers known as the “Magnificent 7”.

Across the Atlantic, the UK’s Office for National Statistics revised GDP figures confirmed last month’s initial figure that the country had entered a technical recession for the first time since early 2020. The economy contracted by 0.3% in the final quarter of 2023, following a 0.1% decline in the third quarter. Nonetheless, it was a favourable week for the UK stocks, particularly for the smaller companies. The FTSE UK Small Cap Index outperformed the FTSE 100, returning +1.4% and +0.3%, respectively. Meanwhile, in the Euro Area, the European Commission reported a rise in consumer confidence across the European Union, reflecting improved sentiments regarding the economic outlook.

In Japan, monetary authorities held an emergency meeting to address concerns regarding the Yen’s recent decline. They hinted at taking action to stabilise the currency after it hit a 34-year low. The weakening Yen has been beneficial for many of Japan’s major exporting companies, as a big part of their profits comes from overseas sales. MSCI Japan returned -1.1% in GBP terms, over the week.

Elsewhere, the Chinese equity market remains volatile. While the Year of the Dragon began on a positive roar, it has since quietened down somewhat due to scepticism surrounding the earnings recovery, pace of stimulus measures, and the ongoing worries in the property sector. MSCI China returned +0.1% in GBP terms over the week and lagged most of the major indices.


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