Good US economic data and AI provide momentum
The stock markets maintained their momentum from the previous month in February and performed very favourably. The continuing enthusiasm for the topic of artificial intelligence drove the markets, as did good economic data from the USA. The markets in Asia also rose sharply. One factor behind this could be the hope that Chinese growth will pick up again.
The German share index DAX reached a record high and rose by 4.58%. The broad European index Stoxx Europe 600 was slightly weaker with a gain of 1.84%. The broad US S&P 500 index was significantly stronger, rising by 5.66% and topping 5,000 points for the first time. The biggest gain in February came from the Far East: Hong Kong's Hang Seng Index climbed by 6.97%. Overall, equities, as measured by the global MSCI World, rose by 4.60% - all index figures in euro terms.
A key performance driver behind this was the continuing enthusiasm of the markets around the topic of artificial intelligence. The major US technology companies grouped under the "Magnificent Seven" presented strong figures and fuelled the share rally. This was complemented by very robust data from the US labour market, with an increase of over 350,000 new jobs and an unemployment rate that remained stable at 3.7%. And the US Purchasing Managers' Index for the manufacturing sector rose to 52.5 points in February (previous month: 50.7), well above the threshold value of 50, which indicates an expanding economy. Its counterpart for services had already jumped from 50.5 to 53.4 points in January, and economists are expecting a further increase in February.
However, inflation in the USA was 3.1% in January (experts had expected a fall to 2.9%) and core inflation was 3.9% compared to the same month last year, proving to be more stubborn than hoped. In view of the positive economic data, a recession in the USA should no longer be an issue in this cycle. On the one hand, the US Federal Reserve wants to avoid a recession, but on the other hand it wants to bring inflation towards its target of 2.0%. If this trend continues, key interest rates are likely to be cut later - possibly not until June - and not as often as expected. If inflation does not fall to 2.0% permanently, the Fed is likely to stop cutting interest rates again.
In the eurozone, the Purchasing Managers' Index for services rose from 48.4 to 50 points, leaving the recessionary zone. However, the index for the manufacturing sector fell unexpectedly from 46.6 to 46.1 points in February. The eurozone economy is therefore likely to continue to tread water in the first quarter of 2024. In line with this, the German ifo business climate index is also stagnating at a low level; expectations are pessimistic, particularly in the manufacturing sector, and the order situation is declining.
The rate of inflation in the eurozone rose by just 2.6% in February compared to the same month last year - in January it was 2.8%. This means that inflation is moving in the direction desired by the European Central Bank. If the inflation rate continues to approach the 2% inflation target in the coming months, the ECB is likely to cut interest rates. This would be the first rate cut since March 2016.
On the bond markets it was noticeable that expectations of interest rate cuts were already premature at the start of the year. Yields on high-quality government and corporate bonds rose noticeably. At 2.41%, 10-year German government bonds yielded 25 basis points higher, while their US counterparts were 34 basis points higher at 4.25%. The price of a troy ounce of gold rose by 0.23% to USD 2,044.30.
The Asian stock markets put in a largely pleasing performance in February. The stock exchanges in China, Japan, Taiwan and South Korea were among the strongest performers. By contrast, the stock exchanges in Singapore and Thailand closed the month with a moderately negative result. The Asian stock markets benefited in part from the positive momentum in the US and European equity regions, which was partly driven by the ongoing enthusiasm surrounding the topic of artificial intelligence.
The "friendshoring" factor is likely to continue to play a role for the Japanese and South Korean markets. In China, on the other hand, the purchasing managers' index for services recovered, while that for manufacturing remained in recessionary territory. The majority of experts expect the annual meeting of the People's Congress at the beginning of March to set a growth target of 5% for 2024, as it did for the previous year, which is likely to be accompanied by stimulus measures in light of the crisis in the property sector.
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