Pictet Group
Weekly house view | Getting closer
The week in review
The large-cap S&P 500 rose 1%[i] last week (in USD), meaning that the index put in a positive performance in 16 out of the past 18 weeks, something not seen since 1971. As usual last week, a large part of these gains came from the tech sector. Indeed, the tech-heavy Nasdaq advanced a more robust 1.8%[ii] (in USD) on the week to reach a record high. Inflation figures were one focus of attention, with price trends in the US seen as continuing to point to Fed rate cuts around the middle of this year. The January price consumption expenditure (PCE) report was a mixed bag, with core prices gaining on a monthly basis, but US Treasury bonds reacted calmly, and even rallied on reassurance from the Fed that its quantitative tightening (QT) was not causing strains in financial markets. European bond markets were a bit more downbeat on data showing that inflation was not coming down as fast as expected. Gold prices rose given optimism that Fed rate cuts were on track.
Geopolitics
The Hamas-Israel conflict passes its 150th day of fighting this week, with prospects of a ceasefire hanging in the balance. The conflict has pushed foreign policy up the agenda in the race for the White House.
Key data
Annual PCE inflation in the US slowed to 2.4% in January from 2.6% in December. The headline PCE rose at a monthly rate of 0.3% in January up from 0.2% in December, while the core PCE increased 0.4%, up from 0.2%. Estimates of US GDP growth were revised down slightly from an annual 3.3% in 4Q 23 to 3.2%. Euro area consumer inflation eased to an annual 2.6% in February from 2.8% in January. Core inflation was 3.1% in February, down less than expected from 3.3% in January. German headline inflation slowed to an annual 2.7% in February from 3.1% the month before, its lowest rate since mid-2021. The European Commission’s economic sentiment indicator weakened slightly to 95.4 in February from 95.8 in January. Japanese industrial production fell 7.5% in January from a month earlier, a reversal of the 1.4% increase seen in December. Retail sales in Japan rose an annual 2.3% in January, more than expected.