February 2024 Market Insights
Most developed markets continued their rally as Chinese markets also joined the upward momentum after months of underperformance.
Written by Kevin Hua Co-founder & Chief Investment Officer
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What happened to the markets in February 2024?
Most developed markets continued their rally as Chinese markets also joined the upward momentum after months of underperformance. Strong corporate earnings especially in growth sectors such as technology fueled the rally.
The best performers were Hong Kong’s Hang Seng HSCEI Index and China’s Shanghai Index, which were up +9.32% and +8.13% (local prices) respectively, as Chinese markets experienced a bounce back month.
The largest negative performances were the U.K. FTSE 250 Index and FTSE 100 Index, down -1.57% and -0.01% (local prices) respectively.
The -1.08% fall by the AUD against the USD, benefitted AUD returns for the Trends and indices.
Solid corporate earnings season in the U.S.
Equities continued their rally off the back of a solid corporate earnings season, especially in the technology and consumer discretionary sectors.
With rates on hold in January and a March cut also unlikely, investors focused on the underlying economic data, which was generally strong. Inflation rose slightly to 3.1% while new job numbers came in above expectations.
Economic data improving in Europe
Inflation numbers in Europe came in at 2.6% and showed some signs of slowing. The purchasing managers’ index (PMI) rose to 48.9 from 47.9 in January, which was encouraging.
This was a similar story in the U.K. and with wage growth at 5.8%, some confidence was rebuilding in the U.K. market. Inflation in the U.K. was steady at 4.0% and remains at a level where the Bank of England is unlikely to cut rates in the short term.
Japanese equities run while Chinese equities had a bounce back month
With Japan showing both modest levels of wage growth and inflation, it is likely that the Bank of Japan will remain a loosening bias for its monetary policy. Macroeconomic data such as 4Q 2023 GDP, consumption, and economic sentiment suggests that the economy is weak but that has not impacted equity markets, as it rallied from corporate earnings.
Chinese equities bounced back from recent lows with investors cautiously optimistic about Chinese policy to stimulate the domestic economy. Tourism revenues over the Lunar New Year holidays in February were higher than before Covid-19, spurring sentiment about consumer spending and optimism.