US Equity Market Thrives Amid Mixed Economic Signals, Fueled by NVIDIA’s Stellar Performance

Market Summary

Last week, stock markets in the United States and Europe closed higher. Japan and Chinese stocks closed lower.

US equity market experienced incline despite mixed signals on the economy and monetary policy. Growth stocks outperformed value shares, led by NVIDIA’s strong earnings.

In Europe, stocks had a positive week with major indexes rallying while the economic data indicates decline in the Eurozone’s business activity. Eurozone bond yields also fell after adjusting to market’s expectation on future interest rate increase.

Japanese stocks rose throughout but closed lower influenced by the Shift in Bank of Japan’s yield curve control strategy leading to higher government bond yields and weakening of Yen against US dollar.

Chinese stocks fell as concerns arise on the China’s economic outlook and property sector, fuelled by deflation signs, disappointing economic data and liquidity issues eroding confidence.

Turkey’s central bank introduced measures to address FX-protected deposits and reduce cost, Brazil also rolled out new fiscal rules to control government debt.

Major News

Last week, Federal Reserve Chair, Jerome Powell said to prepare to raise interest rates further if needed and keep borrowing costs high until inflation is within the Fed’s 2% target. With the current level of inflation, Powell suggested the Fed could hold rates steady at its next meeting in September.

European natural gas prices set for their first weekly decline this month as hope arises to resolve labor disputes among Australian exporters, easing concerns of supply disruptions in a volatile market. Benchmark futures have lost around 10% last week but rebounded on Friday.

Dutch front-month futures traded 1.1% higher at €32.30, and seasonal maintenance in Norway also adds to volatility.

What Caught Our Attention

US Treasury yields, and dollar has experienced gains influenced by the need to address inflation through maintaining interest rates to reach 2% target. Federal fund rate cut is also expected to shift to June 2024, later than anticipated. US government’s bond sell-off continues, pushing yields on long-term debt higher.

S&P 500 and Nasdaq Composite rebounded from three-week losing streak. Dollar also rose against basket of currencies, reflecting anticipation of higher rates.

Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia