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Weekly comment: Global markets pull back as geopolitical tensions rise

Date: 23 April 2024

3 minute read

Weekly podcast – Market overview

This week’s host, Head of Property Research, Ollie Creasey discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter, and Research Analyst, Will Howlett. Among the topics discussed – inflation, interest rates and what markets will focus on next.

This is a marketing communication and is not independent investment research. Financial Instruments referred to are not subject to a prohibition on dealing ahead of the dissemination marketing communications. Any reference to any securities or instruments is not a personal recommendation and it should not be regarded as a solicitation or an offer to buy or sell any securities or instruments mentioned in it.

Market overview – Richard Carter, Head of Fixed Interest Research

Last week, global stock markets saw a retreat of 2.9%, influenced largely by geopolitical events in the Middle East between Israel and Iran. Despite the recent weakness, markets maintain a positive year-to-date gain with the MSCI All Country World Index up 2.8% and have shown significant growth over the past six months. Government bond yields continued to climb on the expectation of less central bank cuts this year and the UK 10-year gilt yield ended last week at 4.23%, up 9 basis points on the week.

In the US, the large cap index fell by 3.0% – marking a third week of widespread losses – as mega-cap tech stocks felt the impact of rising rates on future earnings valuations.

US bond yields and rate expectations have been climbing for the best part of three months, yet the stock market rallied on regardless. But with the developments in Isfahan, there has been a shift to a cautious market sentiment. The Bloomberg World Interest Rate Probabilities function – which calculates the market’s expected federal funds rates from futures trading – indicates a 50% probability of the Federal Reserve implementing up to two rate cuts, a decrease from the six cuts previously expected in January.

US value stocks showed more stability compared to their growth counterparts, with the growth index down by 4.9% and the value index by 0.7%. US tech stocks dropped by -5.5% on the week.

The UK market also faced a slight downturn, but outperformed peers with the large cap index falling 1.2% and the mid cap by 1.6%. The British pound saw a depreciation against the US dollar, closing at 1.24. GBP/USD. In Europe, responses were mixed. The MSCI Europe ex UK Index retreated by 1.0%, while the euro gained strength against the US dollar, closing at 1.07.

Streaming success for Netflix

Netflix’s crackdown on password sharing helped the streaming service surpass Wall Street forecasts for first quarter earnings, yet it’s shares fell after it said it planned to stop regularly disclosing subscriber numbers. 

One of the original pioneering FANG stocks, Netflix’s operational income soared by 54%, with a notable addition of 9.3m subscribers globally in the first quarter. This suggest that measures taken to combat password sharing have been more effective than many expected. Nevertheless, the company’s share price experienced a 5% decrease post-earnings announcement, hinting at a possible shift in sentiment among investors as the bar is raised on expectations for positive surprises.

This week four of the magnificent seven – Tesla, Meta (formerly Facebook), Microsoft, and Alphabet (formerly Google) – are set to release their quarterly results. Investors will be watching closely to see whether this group of stocks that has powered the broader market’s advance over the last few years can deliver updates that meet, or even exceed, increasingly lofty expectations.


Ollie Creasey

Head of Property Research

Richard Carter

Head of Fixed Interest Research

William Howlett

Equity Research Analyst

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