© Reuters. FILE PHOTO: A visitor walks past Japan’s Nikkei stock prices quotation board inside a building in Tokyo, Japan February 19, 2024. REUTERS/Issei Kato/File Photo
Global Equity Markets Lose Momentum
By Herbert Lash and Huw Jones
NEW YORK/LONDON (Reuters) – As optimism surrounding Nvidia’s strong performance wanes, global equity markets experienced a decline on Friday, despite setting a new high. Concurrently, Treasury yields lowered amid speculation that the Federal Reserve will delay interest rate cuts until at least June.
While Wall Street saw some gains, Nvidia briefly reached a market value exceeding $2 trillion for the first time, driven by the surge in artificial intelligence (AI) investments following the company’s stellar quarterly earnings report a few days earlier.
Nvidia’s stock rose 4.9% to a peak of $823.94 before easing back to approximately 1.7%. Concerns about stretched valuations after a robust rally, which has seen the stock climb more than 7% this year, linger; however, there is confidence in the potential profit increases companies may witness from AI technologies.
“We believe that there is limited further upside from current levels,” commented Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management in New York.
Marcelli added, “Nevertheless, we must recognize that over the past year, we have consistently been pleasantly surprised by the significant profit growth seen in some AI-centered firms.”
Positive Economic Data Boost Markets
The release of data indicating increased growth in the U.S. services sector in January—due to a rise in new orders and a rebound in employment—spurred gains in the equity markets. Yet, concerns regarding potential inflationary pressures surfaced as a measure of input prices reached an 11-month high.
MSCI’s all-country world index, which reflects global stock performance, climbed 0.13% after reaching a new intraday high.
Fed Signals Patience on Interest Rates
The combination of robust growth and inflation that is yet to ease to the Fed’s 2% target has led Federal Reserve officials to push back against expectations of rate cuts.
“The strong labor market has significantly emboldened the Fed to maintain high rates for a longer duration,” stated Dec Mullarkey, a managing director at SLC Management in Boston.
Mullarkey elaborated, “As a result, the Fed is indicating its willingness to exercise patience, allowing more data to accumulate and solidify the evidence of a well-balanced economy before making any rate adjustments.”
Market and Currency Movements
Fed funds futures currently indicate a 52.3% chance of a rate cut in June, with a 34.7% probability of no cut—one that sharply contrasts the expectations on February 1, when there was a 62% probability of a March rate cut, according to CME Group’s FedWatch Tool.
In Europe, the pan-European Stoxx 600 index rose by 0.43%, marking its fifth consecutive week of gains and achieving a new closing high. Both the French CAC 40 and German DAX also closed at record highs.
On Wall Street, the Dow Jones Industrial Average rose by 0.11%, the S&P 500 gained 0.08%, while the tech-heavy NASDAQ dropped by 0.16%.
Investors are looking forward to further guidance on global economies, as the dollar heads towards its first weekly decline in 2024.