CONT-AI-GION
The equity market divergence continued last week. The major US indices all logged weekly losses as AI fallout fears persisted but value stocks continued to outperform growth and the major European indices finished in the black.
This week, data releases are light but investors will watch for any fallout from another US government shutdown as well as parsing the minutes of the Federal Reserve rate meeting and the December Job openings. We may also get a Supreme Court ruling on the legality of US tariffs at the end of the week.
European equity markets again shrugged off the AI fears persisting on the other side of the Atlantic. The STOXX 600 finished in the black buoyed by economic growth and falling unemployment in the eurozone. US equity markets contracted again as AI company Altruist released a tax-planning plugin that caused investors to sell off shares in Wealth Management firms. The concerns over the AI fallout spread into the Real Estate and logistics sectors as the week progressed.
Friday saw a reprieve for equities following the release of an employment report which showed that the US economy added 130,000 jobs in January - a number that was well ahead of estimates. Inflation data showed consumer price rises continuing to slow with core prices holding steady. For the seventh week in a row, value stocks outperformed their growth peers whilst Japanese equities rallied strongly following the landslide election results with the Nikkei 225 adding 4.9% over the week.
AI fears spread from the software sector into professional services as markets tried to assess the likely impact of the technology . The S&P 500 dropped -1.39% over the week, while the tech-heavy NASDAQ 100 dropped -2.1%. In Europe, the STOXX 600 rose 0.09% over the week.
US treasury yields fell last week, (bond yields rise as bond prices fall) while German 10yr yields also dropped. The 10-year US Treasury yield dropped by ~17bps to 4.05% as investors looked to safe havens in the face of concerns over the impact of AI. The German bund equivalent dropped by 9bps to 2.76%.
- Mon 16th US - Markets closed for Presidents Day * Japan - Q4 GDP estimate
- Tue 17th US - Conference Board Employment Index * Germany - Inflation data
- Wed 18th - US - FOMC rate meeting minutes
- Thu 19th US - December Job Openings & Labor Turnover Survey (JOLTS) data
- Fri 20th US - Updated Q4 GDP
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.