Weekly Market Recap

19 February, 2024


Our Multi-Asset Solutions team produce a weekly market recap which aims to summarise the previous week’s major events and developments that may impact markets. They try to include points that may aid you in your decision making or conversations with clients. This is supplemented by a market data sheet, offering a summary of financial market performance. Last week’s summary is below. 

Economic and political backdrop

The UK

Official data showed that the UK economy fell into recession in the final three months of last year and that inflation held steady in January, reviving market expectations that the Bank of England (BoE) could cut interest rates as soon as June.

A preliminary estimate of GDP showed a greater-than-expected contraction of -0.3% in the three months through December. The economy shrank -0.1% between July and September.

Meanwhile, annual consumer price growth undershot consensus forecasts, coming in at 4.0%, the same as in December. Core inflation, excluding volatile food and energy prices, was also unchanged at 5.1%. However, services inflation accelerated to 6.5%.

BoE Governor Andrew Bailey sought to downplay the GDP data before the figures had been released, asserting that a recession would be “very shallow” and that more emphasis should be placed on recent indicators, which “have shown some signs of an upturn.” He later told a parliamentary committee that the inflation data were “good news,” with the caveat that services inflation was still too high and more clear evidence was required that wage growth was slowing. Wages, excluding bonuses, grew 6.2% in the three months through December, down from 6.7% in September to November, the slowest pace in over a year.

The US

Investors digested several upside inflation surprises during last week. On Tuesday, the major equity indexes sold off after the Labor Department reported that consumer prices had risen 0.3% in January (3.1% year over year), a tick above consensus expectations of around 0.2%. More concerning may have been the 0.4% rise in core consumer prices, keeping the year-over-year rise at 3.9%, nearly double the 2.0% target of the Federal Reserve (Fed).

Stocks regained some momentum on Wednesday, after Chicago Fed President Austan Goolsbee told conferencegoers in New York that slightly higher inflation over the coming months was still consistent with the path back to the Fed’s 2% inflation target. He noted that the upside surprises were driven largely by shelter costs (as measured by owners’ equivalent rent), which he termed a “puzzle,” according to Bloomberg. He also cautioned the impact of overtightening on the Fed’s employment mandate.

Stock futures fell again after some more substantial upside inflation surprises arrived Friday morning, however. The Labor Department reported that producer prices, which are typically more volatile, had increased 0.3% in January – the most in five months – after falling -0.1% in December. Core prices rose 0.5%, well above expectations of around 0.1%. A 2.2% jump in the cost of hospital outpatient care appeared partly to blame.

Much of the rest of the week’s economic data were also arguably disappointing – although signs of weaker growth seemed to help calm inflation concerns. On Thursday, the Commerce Department reported that retail sales had plummeted -0.8% in January. While many economists pointed to seasonal factors and harsher weather in January as a reason for the weakness, typically weather-sensitive sales at restaurants and bars rose 0.7%. Initial jobless claims also came in below consensus, while continuing claims were slightly above. While housing starts, reported Friday, came in lower than expected, a gauge of homebuilder confidence surprised on the upside.


The European Commission (EC) cut its forecast for eurozone economic growth in 2024 to 0.8% from the 1.2% predicted in November. This downward revision reflected inflation, which has eroded purchasing power, and higher interest rates, which curbed credit. The EC projected that economic growth would accelerate to 1.5% in 2025, slightly less than the previous estimate of 1.6%, it said. Separately, the second GDP estimate confirmed that the economy stagnated in the fourth quarter of last year, after shrinking -0.1% in the previous three months.


The Japanese economy contracted -0.4% quarter on quarter over the final three months of last year, a worse-than-expected slump and marking an entry into a technical recession (defined as two consecutive quarters of negative growth). The main cause was sluggish domestic demand, while export growth was helped by a revival of inbound tourism. The country’s economy is now the world’s fourth largest, slipping behind Germany in GDP terms. Japan faces structural headwinds in the form of weak growth and capital outflows as locals increase overseas investments.


Financial markets in mainland China were closed, and no official indicators were released due to the weeklong Chinese New Year holiday, which began Saturday, 10 February. Early data showed a pickup in consumer spending over the Chinese New Year, China’s most important holiday. More than 61 million rail trips were made in the first six days of the national holiday, a 61% increase over last year’s holiday, according to official media reported by Bloomberg. Travel by road and airplane also improved, while hotel sales on Chinese e-commerce platforms increased more than 60%, according to state media.

However, analysts cautioned that the year-over-year consumption surge was less impressive considering that China was battling nationwide coronavirus outbreaks in early 2023 after Beijing rolled back pandemic restrictions in December 2022. Box office receipts in the first four days of the holiday declined from last year, according to Bloomberg using data from online movie ticket platform Maoyan Entertainment, suggesting that consumers may have reduced their spending per trip. Nevertheless, evidence of strong holiday spending will likely be welcome news for China’s government, which is grappling with deflation and a yearslong property sector crisis that has dampened consumer confidence. China’s stock markets resume trading on Monday, 19 February.


Australian employment was little changed (+500) in January, disappointing market expectation for a bounce back of +2,500 following the large fall (-62,700) in December. At face value, this data suggested a faster deterioration in labour market conditions, but seasonal dynamics might have a role to play. The mix was a process of offset with some 11,100 jobs added in full time whilst -10,600 part time jobs were lost. The unemployment rate increased from 3.9% to 4.1%, the highest level since January 2022. Total hours worked fell -2.5%, which was largely driven by changing patterns of annual leaves. Australian workers’ wages growth expectation has likely peaked alongside lower inflation expectations.


Last week, the MSCI All Country World Index (MSCI ACWI) gained 0.4% (3.4% YTD).

In the US, the S&P 500 Index moved -0.3% lower (5.1% YTD), recording its first weekly decline since the start of the year. Some favourable earnings surprises balanced against discouraging inflation data left the major benchmarks mixed. The declines were concentrated in large-cap growth stocks, however, with an equally weighted version of the S&P 500 reaching a record intraday high on Thursday. After suffering its biggest daily drop since June on Tuesday, the small-cap Russell 2000 Index rebounded to lead the gains for the week. Growth stocks underperformed value shares and small caps outperformed large caps. The Russell 1000 Growth Index returned -1.2% (7.5% YTD), the Russell 1000 Value Index 0.9% (2.1% YTD) and the Russell 2000 Index 1.2% (0.4% YTD). The technology-heavy Nasdaq Composite Index declined -1.3% (5.2% YTD).

Trading volumes picked up later in the week, after a very quiet start on Monday following the Super Bowl weekend and with multiple markets shut for holidays, including the Chinese New Year and Carnival celebrations on the eve of the start of Lent on Wednesday.

In Europe, the MSCI Europe ex UK Index rose 1.3% (3.3% YTD) as signs of cooling inflation and a better outlook for interest rate cuts cheered investors. Major stock indexes advanced. Germany’s DAX Index added 1.1% (2.2% YTD), France’s CAC 40 Index increased 1.6% (3.1% YTD), on upbeat corporate earnings, hitting new highs during the week, and Italy’s FTSE MIB Index climbed 1.8% (5.0% YTD). Switzerland’s SMI Index strengthened 2.0% (1.6% YTD). The euro was little changed versus the US dollar, ending the week at USD 1.08 for EUR.

In the UK, the FTSE 100 Index surged 2.0% (flat YTD) and the FTSE 250 Index gained 0.7% (-2.3% YTD). The British pound was stable versus the US dollar, ending the week at USD 1.26 for GBP.

Japan’s stock markets rose over the week. The TOPIX Index rallied 2.6% (10.9% YTD) and the TOPIX Small Index added 1.4% (4.9% YTD). The Nikkei 225 Index hovered around its highest level in 34 years, continuing its strong performance in the year-to-date period and in 2023. Yen weakness and positive corporate earnings releases lent support. On the economic front, weak fourth-quarter growth data added to uncertainty about the future path of the Bank of Japan’s monetary policy, which the central bank deems dependent on sustainably achieving its 2% inflation target.

The yen weakened to JPY 150.2 against the US dollar, from 149.3 at the end of the previous week. The currency’s persistent weakness prompted fresh verbal intervention by Japan’s finance minister, but he refrained from commenting on the prospect of actual intervention in the foreign exchange market. Japan’s Ministry of Finance last stepped into the market to prop up the yen in September 2022. The weak yen has been a boon for Japanese exporters, as it boosts the value of their revenues earned overseas.

In Australia, the S&P ASX 200 Index slightly firmed 0.2% (0.9% YTD). The disappointment of minimal Australia January job adds was more than offset by the soothed nerves about an overheated US economy after a drop in US retail sales. Australian government bonds yields moved modestly higher. The Australian dollar remained largely unchanged versus the US dollar.

MSCI Emerging Markets Index closed 2.1% higher (-0.6% YTD), with a positive contribution to performance from the stock markets of Taiwan, South Korea, India and Brazil. Chinese markets were closed for the Chinese New Year holiday. In Hong Kong, the benchmark Hang Seng Index jumped 3.8% (-4.1% YTD).

In Hungary, the government recently reported that headline inflation in January was at a year-over-year rate of 3.8%. This was lower than expected, thanks to reduced pricing pressures among non-core items, and it was lower than the 5.5% rate measured in December. Also, core inflation in January was measured at a year-over-year rate of 6.1% versus 7.6% in December. T. Rowe Price credit analyst Ivan Morozov believes that both year-over-year inflation and inflation momentum are now at the central bank’s target, and he expects inflation to hover around 3% this year. As a result, he expects the central bank to continue cutting interest rates during the year, though he believes policymakers will continue watching the forint closely and could decide to pause rate cuts if the currency weakens materially.

In Poland, the Polish government reported on Thursday that headline inflation in January was at a year-over-year rate of 3.9%. This was below expectations for a 4.1% reading, and it was well below the 6.2% rate measured in December. While Morozov is encouraged by the general disinflation trend, he is sceptical that the central bank will pursue interest rate cuts in the near term. With core inflation momentum currently exceeding 5.0%, he believes that policymakers will likely keep the benchmark reference rate at 5.75% for the time being.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.2% (-1.3% YTD), Bloomberg Global High Yield Index (hedged to USD) 0.1% (0.3% YTD) and Bloomberg Emerging Markets Hard Currency Aggregate Index was little changed (-1.1% YTD).

The inflation data caused investors to lower their expectations for potential rate cuts considerably. According to the CME FedWatch Tool, the futures market ended the week pricing in only a 10.5% chance of a rate cut in March compared with a 65.1% chance a month earlier. The yield on the benchmark 10-year US Treasury note surged to an intraday high of 4.33% on Friday, its highest level since 1 December. Over the week, the 10-year Treasury yield increased 10 basis points (bp) to 4.28% from 4.18% (up 40bp YTD). The 2-year Treasury yield increased 16bp to 4.64% from 4.48% (up 39bp YTD).

Core eurozone government bond yields rose modestly after the higher-than-expected US inflation print. European Central Bank President Christine Lagarde expressed concern over “making a hasty decision” to ease policy in case inflation rebounds, adding to the upward pressure on short-dated bond yields. Over the week, the 10-year German bund yield increased 2bp, ending at 2.40% from 2.38% (up 38bp YTD). Peripheral eurozone bond yields fell, however, particularly those of longer-dated Italian debt.

In the UK, the 10-year gilt yield rose 3bp, ending the week at 4.11% from 4.08% (up 58bp YTD).

The yield on the 10-year Japanese government bond finished the week broadly unchanged at 0.73%, as investors digested the latest US economic data, including inflation prints, and their likely impact on the timing of any potential Fed rate cuts.

In the US investment-grade corporate bond market, a large amount of new issuance pushed spreads wider on Monday, but increased demand, especially from yield-based buyers, helped spreads tighten throughout the rest of the week. High yield bonds struggled from broad risk-off sentiment, but elevated cash levels due to calls, coupon payments and tenders combined with modest issuance provided a supportive technical backdrop.

Yoram Lustig, CFA
Head of Multi Asset Solutions,

Michael Walsh, FIA, CFA
Solutions Strategist


Niklas Jeschke, CFA
Solutions Analyst


Eva Wu,
Solutions Analyst


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