Weekly Market Report: March 19, 2024

USA

Stocks were mostly lower for the week, as investors weighed upside surprises in inflation data and signs of moderating consumer spending. The Dow Jones Industrial Average held up best among the major indexes and reached a record high on Wednesday before falling back to end the week. Energy shares outperformed on the back of higher oil prices, while technology shares lagged due to weakness in NVIDIA and other chipmakers.

The Labor Department's consumer price index (CPI) rose 0.4% in February, in line with consensus expectations, but core prices (less food and energy) rose a tick more than expected, also by 0.4%.

The bond market’s reaction to the inflation surprises was more pronounced, with the yield on the benchmark 10-year Treasury note touching its highest intraday level (4.32%) since February 27.

Europe

STOXX Europe 600 Index added 0.31%, notching an eighth consecutive weekly gain. Encouraging corporate earnings and growing hopes that the European Central Bank (ECB) would lower borrowing costs in June stoked the advance. France’s CAC 40 Index rose 1.70%, Italy’s FTSE MIB gained 1.61%, and Germany’s DAX added 0.69%. The UK’s FTSE 100 Index put on 0.94%.

The yield spread between German and Italian benchmark 10-year sovereign bonds narrowed significantly due to growing confidence in Italy’s economic policy and increased demand for high yield debt ahead of a likely reduction in borrowing costs later this year.

Japan

Japan’s stock markets generated a negative return over the week, with the Nikkei 225 Index losing 2.5% and the broader TOPIX Index down 2.1%.

The likelihood of the Bank of Japan (BoJ) ending its negative interest rate policy in the near term rose with the announcement of the highest average wage rises for members of Japan’s labor unions since the early 1990s. The BoJ is committed to the view that monetary policy tweaks will hinge on the meeting of its 2% inflation target, driven by inflation accompanied by wage growth. Economists’ consensus expectations are now converging around a March or an April interest rate hike.

China

Chinese stocks rose as the government’s recent market stabilization measures boosted investor confidence despite a weak economic outlook. The Shanghai Composite Index gained 0.28%, while the blue chip CSI 300 added 0.71%. In Hong Kong, the benchmark Hang Seng Index rallied 2.25%

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