markets & economy  |  FEBRUARY 23, 2024

Global Markets Weekly Update

Ebullience over artificial intelligence fueled rally in U.S. and European equities


Small-caps lag in strong week for broad U.S. stock market 

Equity indexes generally moved higher during a week shortened by the Presidents’ Day holiday on Monday, although the small-cap Russell 2000 Index lost ground. The S&P 500 Index hit new intraday highs, as did the Nasdaq Composite Index, which posted its biggest daily gain in about a year on Thursday, when NVIDIA added a record USD 277 billion to its market capitalization. After Wednesday’s trading session, the chipmaker reported strong quarterly revenue and earnings that topped Wall Street estimates. The company also increased its full-year guidance on robust demand for its chips, which are used in artificial intelligence applications.

In fixed income markets, T. Rowe Price traders noted that a lack of sellers in the high yield bond market meant that new issues were met with solid demand. The equity rally sparked by technology company NVIDIA’s strong earnings also appeared to be supportive of high yield bonds.

Weekly jobless claims come in below expectations

The week featured a relatively light economic calendar, with most data coming in roughly in line with expectations. Initial and continuing jobless claims were exceptions. Both came in below consensus estimates, suggesting that the labor market remained tight. On a seasonally adjusted basis, 201,000 new claims were filed in the week ended February 17, a decline of 12,000 versus the preceding week. The number of continuing claims slipped 27,000 to 1.862 million.

Initial February PMI points to uptick in manufacturing activity

S&P Global released early estimates of its purchasing managers’ indexes (PMIs) for services and manufacturing. The research group’s gauge of manufacturing activity unexpectedly rose to 51.5, its highest level in 17 months, helped in part by an increase in export orders. Business activity in the services sector cooled slightly, with this PMI pulling back to 51.3 from 52.5 in January. Nevertheless, the latest services PMI reading remained above 50, the dividing line between an expansion and contraction in activity.

Fed’s Waller suggests policymakers shouldn’t rush to cut rates

In a speech delivered on Thursday, Federal Reserve Board Governor Christopher Waller opined that higher-than-expected inflation in January, along with the tight jobs market and the economy’s strength in the fourth quarter, “reinforced his view that we need to verify that the progress on inflation we saw in the last half of 2023 will continue.” Waller believes that inflation is “likely” to return to the Fed’s 2% target. But he also cautioned that he’d like at least a few more months of data to see “whether January was a speed bump or a pothole.”

Index Friday's Close Week's Change % Change YTD
DJIA 39,131.53 503.54 3.83%
S&P 500 5,088.80 83.23 6.69%
Nasdaq Composite 15,996.82 221.17 6.56%
S&P MidCap 400 2,858.02 29.72 2.75%
Russell 2000 2,016.69 -16.06 -0.51%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price’s presentation thereof.


In local currency terms, the pan-European STOXX Europe 600 Index climbed to a record level, ending the week 1.15% higher. The benchmark rose as stellar quarterly results from NVIDIA stoked a global rally and demand for technology stocks. France’s CAC 40 Index gained 2.56%, Italy’s FTSE MIB added 3.05%, and Germany’s DAX advanced 1.76%. The UK’s FTSE 100 Index was little changed, reflecting weakness in mining and energy stocks.

European government bond yields broadly rose as investors trimmed bets on the number of interest rate cuts this year after stronger-than-expected purchasing managers’ surveys.

Eurozone PMI stabilizing

Early PMI data for February suggested that the eurozone economy could be stabilizing, helped by a recovery in the services sector. A provisional estimate of the HCOB eurozone composite PMI for output rose to 48.9 from 47.9 in January, an eight-month high but still in contractionary territory. (PMI readings below 50 indicate that business activity shrank.) The composite PMI for Germany’s economic output declined for the eighth month in a row. Output likewise weakened in France. However, output in the rest of the eurozone expanded for a second month running.

Germany’s economy officially shrank in Q4

Separately, final data confirmed Germany’s economy contracted 0.3% in the fourth quarter. Government consumption fell sharply due to budget constraints, and gross fixed capital formation shrank as companies cut investment. Meanwhile, the German government sharply reduced its forecast for economic growth this year to 0.2% from 1.3%, citing weaker global demand, geopolitical uncertainty, and higher inflation.

UK PMI rises four months in a row; BoE’s Bailey “comfortable” with rate bets

In the UK, the composite PMI output index rose to 53.3 in February from 52.9 in January, accompanied by a solid improvement in customer demand.

Bank of England (BoE) Governor Andrew Bailey told a parliamentary committee that he was “comfortable” with investors betting on rate cuts this year, although he also asserted that the economy was “showing distinct signs of an upturn” after a recession last year. He added: "We do not endorse the market curve. We are not making a prediction of when or by how much [we will cut rates].'s not unreasonable for the market to think that.”


In a shortened week, Japanese equities ended Thursday at a new all-time high, with the Nikkei 225 Index breaking the previous record set more than 30 years ago in December 1989. The broader TOPIX also finished at its highest level since February 1999, as Japan’s return to steady growth and corporate profitability both continued to underpin confidence. However, it was not all plain sailing, and it took a Thursday rally, ahead of the Emperor’s Birthday holiday, to snap a four-day losing streak.

In the fixed income market, 10-year Japanese government bond yields finished the week at 0.711%, down slightly from 0.725% the previous Friday.

Strong machinery orders and exports, but manufacturing PMI disappoints

On the economic front, early-week data showed that core machinery orders were up a seasonally adjusted 2.7% in December, having contracted 4.9% the previous month. This delivered a better-than-expected 0.7% annual decline in machine orders.

Japanese export data also came in strong, rising to a record high in January. Exports increased 11.9%, a second straight month of growth, allaying some fears about slowing global demand. With energy imports also lower, Japan’s trade deficit shrank to roughly half of what it was a year ago.

Later in the week, data from Japan’s manufacturing sector disappointed, with the latest purchasing managers’ survey indicating continuing contraction. PMI for this segment of the economy came in at 47.2, down from 48.0 in January. On the services side, PMI data also softened but remained in expansionary territory, easing from 53.1 in January to 52.5 in February.

Company profitability and improving price outlook underpin confidence 

Equities received a boost after Bank of Japan Governor Kazuo Ueda expressed confidence that moderate inflation was likely to continue as wages grow. Financial markets remained laser-focused on when the central bank will end its negative interest rate policy and break free from years of ultra-loose monetary policy.


Chinese equities rallied as recovery hopes rose following buoyant holiday spending during the prior week’s Lunar New Year holiday. The Shanghai Composite Index rose 4.85%, while the blue chip CSI 300 gained 3.71%. In Hong Kong, the benchmark Hang Seng Index advanced 2.36%, according to FactSet.

Mixed signals from Lunar New Year tourism data

Tourism revenue over the weeklong Lunar New Year holiday surged 47% over the 2023 holiday and surpassed pre-pandemic levels, according to data from the Ministry of Culture and Tourism. Domestic trips rose 34% from last year, and international trips also increased. However, average spending per trip fell 9.5% from 2019, signaling lingering caution among consumers. Moreover, this year’s holiday lasted eight days, a day longer than the 2019 break.

PBoC announces supportive measures

In monetary policy news, the People’s Bank of China (PBoC) injected RMB 500 billion into the banking system via its medium-term lending facility, compared with RMB 499 billion in maturing loans, and left the lending rate unchanged as expected. The operation was targeted at maintaining ample liquidity in the banking system, the central bank said in a statement.

The PBoC announced that the five-year loan prime rate was lowered by a bigger-than-expected 25 basis points to 3.95%, marking the largest cut since the reference rate was introduced in 2019. Lowering the five-year rate, a key gauge for mortgages, will reduce mortgage rates for homebuyers and aims to shore up demand in the troubled property sector. Policymakers left the one-year lending rate unchanged.

New home prices register seventh monthly decline 

New home prices in 70 cities fell 0.3% sequentially in January, marking the seventh monthly contraction, according to the statistics bureau.

Other Key Markets

Türkiye (Turkey)
Monetary policymakers may use currency as inflation fighting tool

On Thursday, Türkiye’s central bank held its scheduled monetary policy meeting. As was widely expected, the central bank left its key interest rate, the one-week repo auction rate, at 45.0%. According to T. Rowe Price sovereign analyst Peter Botoucharov, the post-meeting statement was hawkish, with policymakers pledging to tighten monetary policy further if they anticipate “a significant and persistent deterioration” in the inflation outlook.

However, Botoucharov believes the main news is that policymakers explicitly stated that a “tight monetary stance will continue to contribute to Turkish lira’s real appreciation process.” He thinks this could be a sign that the central bank is shifting some attention from rebuilding its foreign exchange reserves to supporting the currency as an inflation-fighting tool. All other things being equal, a stronger currency can result in lower import prices, while a weaker currency usually leads to higher import prices.

Disinflation trend continues, may prompt policymakers to begin rate cuts 

On Thursday, Mexico’s government reported that consumer price inflation for the first half of February that surprised to the downside. According to T. Rowe Price emerging markets sovereign analyst Aaron Gifford, the drop in inflation was driven by non-core items, but core costs were also slightly below consensus. Headline inflation declined to a year-over-year rate of 4.5% versus 4.9% in the previous inflation reading. Similarly, core inflation fell to a year-over-year rate of 4.6% compared with 4.8% in the previous reading. Gifford believes that the data showing the disinflation trend could be enough to convince policymakers to begin reducing interest rates fairly soon.

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