Positive Momentum

The international stock markets initially moved mostly sideways in January and were able to maintain their positive momentum from before the turn of the year in the second half of the month. Only China, otherwise a strong driving force behind the global economy, is sluggish. And hopes of interest rate cuts turned out to be premature.

The German stock index DAX rose by 0.91% and the broad European stock index Stoxx Europe 600 rose by 1.39%. The US stock index S&P 500 recorded an increase of 3.59%. In Asia, however, the signs were predominantly negative in January, with Hong Kong's Hang Seng Index losing -7.46%. Global equities, as measured by the MSCI World, rose by 3.14% - all index figures in euro terms.

The stock markets thus reacted positively to economic data that turned out better than the market had expected. The US economy, for example, grew by 3.1% in the fourth quarter of 2023 compared to the same quarter of the previous year and was also able to report growth of 3.1% for 2023 as a whole. The eurozone was able to avoid a technical recession, i.e. two consecutive quarters of economic contraction. After -0.3% in the third quarter, the economy stagnated at 0.0% (compared to the previous year).

The market therefore continues to expect that the USA will be able to avoid a recession, i.e. achieve a soft landing. By contrast, the eurozone figures prompted some market participants to continue to hope for an interest rate cut in the near future, possibly in the first quarter. However, interest rate cuts usually only have an impact on the economy after a delay of several months. The purchasing managers' indices for manufacturing and services in the eurozone remain in recessionary territory, meaning that an interest rate cut by the ECB would not turn the tide so quickly. Germany's and the eurozone's otherwise strong export economy is also unlikely to provide any major impetus for the time being, as China, the driving force behind the economy and a major sales market, is sluggish in the face of the property market crisis.

Inflation data in the US tends to argue against an imminent interest rate cut by the US Federal Reserve (Fed), as the inflation rate rose year-on-year in both November (+3.1) and December (+3.4%). Accordingly, the Fed left key interest rates unchanged at the end of the month at a range of 5.25 to 5.50%. Although it cancelled the reference to possible further interest rate hikes in its meeting minutes, it referred to the necessary prerequisite for an initial interest rate cut, namely "defeated" inflation - with a target of 2.0%. The Fed thus dampened market expectations of a first interest rate cut as early as March.

In the eurozone, inflation fell from 2.9% in December to 2.8% in January (compared to the same month of the previous year). The core rate, excluding the volatile energy and food components, also fell from 3.4% to 3.3%. Price pressure has thus eased for the time being. However, higher labour costs and a persistently higher inflation rate for services of 4.0% over three months suggest that inflation figures will rise again later in the year. At its meeting at the end of January, the ECB stated that wage growth had stabilised, but also emphasised that it was still too early to discuss interest rate cuts.

The significantly reduced probability of early interest rate cuts put pressure on the bond markets, where a first interest rate cut by the Fed in March was fully priced in. Yields on government and corporate bonds rose accordingly. Against this backdrop, the price of a troy ounce of gold fell by -1.14% to USD 2,039.52.

The Asian stock markets were largely negative in January. The Chinese economy grew by 5.2% in 2023, slightly more than the roughly formulated growth target of "around 5%". However, the starting point for 2022 was relatively weak due to the zero-covid strategy still in place at the time. In addition, the crisis in China's property market became apparent once again in January, as one of the major property companies collapsed. Leading indicators such as the purchasing managers' indices for manufacturing and services are just below or just above the neutral mark of 50 points, signalling no slump but also no real growth momentum in the coming months. China's export economy is suffering from weak foreign demand and domestic consumption is being adversely affected by the property market crisis, among other things.

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