MIDDLE EAST CONFLICT ERUPTS
Equity market performance diverged again last week. US markets sold off as AI disruption fears and a hotter-than-expected inflation report set investors on edge. European markets finished in positive territory, benefitting from investors seeking to diversification away from US assets.
Over the weekend, the US and Israel launched a series of strikes against Iran, killing senior figures from the Islamic Republic including supreme leader Ayatollah Ali Khamenei. Iran retaliated with a series of strikes targeting Israel and neighbouring states hosting US military sites. Markets will be watching for signs of the conflict spreading.
European equity markets continued their upward trend last week buoyed by strong corporate earnings and an appetite for diversification away from US assets. US equity markets logged a negative week, retreating as investors continued to show nerves about the possible extent of AI disruption and the possible fallout from increased tariff uncertainty. Markets sold off on Monday when a paper from Citrini Research caught investors' imaginations and tapped into the unease over the potential for AI to disrupt business models across diverse sectors. Mid-week, markets steadied a bit in the run up to NVIDIA's earnings but despite those numbers beating expectations, they were not seen as good enough in a market that many feel is priced for perfection and the slump resumed into Friday. A Produced Price Inflation report didn't offer much optimism coming in hotter than expected.
Positive earnings data pushed the STOXX 600 to a fresh record high as it gained 0.52% for the week. In the US, the teach heavy NASDAQ 100 shed -0.95% while the S&P 500 closed down -0.44%.
Bond yields fell last week, (bond yields fall as bond prices rise) on both sides of the Atlantic. The 10-year US Treasury yield fell by ~12bps to 3.95% as investors sought safe haven assets due to rising geopolitical fears. Economic and financial issues also played a role in pushing the 10yr yield below 4%, triggered by Fintech Block's announcement of a 40% workforce reduction and renewed worries over private-credit write-downs. The German bund equivalent dropped by 8bps to 2.66% as sentiment carried over.
- Mon 2nd Global PMI's
- Tue 3rd - Eurozone - Flash Harmonised Indices of Consumer Prices (HICP) inflation rate estimates
- Wed 4th Eurozone - January unemployment figures
- Thur 5th Eurozone - ECB rate meeting minutes
- Fri 6th US - February employment figures
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.