Weekly comment: A mixed week for global markets

4 minute read

Weekly podcast – Market overview

This week’s host, Investment Manager, Andrew Cartwright discusses the ups and downs of the past week with Chris Beckett, Head of Equity Research specializing in the banking and finance sector. Among the topics discussed – recent election news, interest rates and what markets will focus on next.

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Market overview – Richard Carter, Head of Fixed Interest Research

It was a mixed performance for global markets last week, with some indices climbing and others descending. The MSCI All Country World Index saw a slight decrease of 0.4%, yet it maintained a robust year-to-date advance of 9.9%.

In the US, the performance of large-cap companies was nearly unchanged, preserving their impressive year-to-date gain of 11.8% as trading paused for the Memorial Day holiday. Growth stocks were the frontrunners, achieving a 1.0% return (14.4% YTD), while value stocks experienced a downturn of 1.4% (7.4% YTD). Tech heavy stock indices continued its impressive 2024, adding 1.4% (13.1% YTD), thanks in part to the standout role of AI chipmaker NVIDIA.

In April, UK consumer price growth eased to 2.3%, the lowest in almost three years, and slightly above the forecasted 2.1%. This reduction was not as pronounced as expected, leading to a recalibration of expectations for a midyear rate cut by the Bank of England. Core inflation – which omits the fluctuating costs of energy and food prices – also came in higher than anticipated at 3.9%. The financial markets are now pricing in the possibility of a single 25 basis point rate cut this year, revising earlier expectations of two cuts. Reacting to the news, large cap stocks dipped by 1.2% (up 9.5% year-to-date), while midcap experienced a slight uptick of 0.2% (up 6.9% year-to-date). The British pound held steady against the US dollar, ending the week at 1.27 USD for 1 GBP.

In Europe, a recent survey indicated that Euro zone consumers have moderated their inflation expectations for the coming year to 2.9%, down from 3.0%. Expectations for inflation over the next three years also edged down to 2.4% from 2.5%, remaining above the European Central Bank’s target of 2%. With the pace of potential interest rate cuts this year under scrutiny, the MSCI Europe ex UK index fell by 0.2% (10.3% YTD).

In Japan, the equity market showed mixed results. Large cap slightly decreased by 0.1% (17.1% YTD), while small Index fell by 0.6% (9.6% YTD). Positive economic data and NVIDIA’s impressive earnings initially buoyed Japanese tech stocks. However, the losses on Friday reflected the downturn on Wall Street following US data that suggested a US interest rate cut might be further delayed.

NVIDIA’s impressive impact

NVIDIA’s first-quarter earnings report was a standout event in a week of mixed market performances, highlighting the company’s significant impact on market trends.

The AI chipmaker’s shares climbed over 9% after announcing a 262% surge in revenue and a 10-for-1 stock split, underscoring the company’s strong financial results. As the third-largest company by market capitalisation, NVIDIA’s growth has been remarkable, with Bank of America noting that it accounted for 37% of the US large caps’ earnings-per-share over the past year. By the close of business on Thursday, NVIDIA’s market capitalisation had increased by over USD 220 billion.

NVIDIA CEO Jensen Huang remained bullish over its blockbuster growth, stating that it was set to continue this year with a new line of chips, and will remain to roll out newer, powerful chips annually.