Market Opinion - March 2024

Market Opinion - March 2024

March saw global equity markets gain ground, with Europe, the US, and the UK all showing positive movements.

The UK equity market closed higher in March, with the FTSE 100 hitting a 12-month high. This positive momentum followed a period of economic recovery, with the Office for National Statistics (ONS) reporting a 0.2% rise in Gross Domestic Product (GDP) in January, driven by the services sector. UK inflation dropped to 3.4% in February, its lowest level since September 2021, surpassing forecasts. The Bank of England (BoE) held interest rates at 5.25%, expecting inflation to dip below 2% by the second quarter of the year, with markets anticipating rate cuts from June. Wage growth slowed to 5.6% annually, and Chancellor Jeremy Hunt introduced a 'Budget for long-term growth,' including tax reductions and investment incentives. Consumer confidence remained stable despite some inflation concerns.

US equity markets finished March on a high note, with all three major indices - S&P 500, Nasdaq, and Dow Jones - advancing to close out a strong quarter. Investor sentiment improved thanks to the prospect of lower US interest rates. Federal Reserve (Fed) Chair Jerome Powell's early March testimony indicated that interest rate cuts could be imminent. February's consumer price index inflation of 3.2% slightly exceeded economists' 3.1% forecast, while the core PCE price index matched expectations at 2.8%.

European equity markets closed off a strong quarter, setting new highs in March. This was supported by robust economic data and expectations that central banks would soon start cutting interest rates. Key sectors like financials and energy outperformed, while technology lagged. The European Commission Economic Sentiment Indicator (ESI) rose to 96.3, showing improved confidence in industry, services, and retail. The Eurozone composite purchasing managers' index (PMI) hit a nine-month high of 49.9. Despite a surprise 25-basis points interest rate cut by the Swiss National Bank (SNB) to 1.50%, the European Central Bank (ECB) plans to assess wage pressures in June before taking any action.

Asia Pacific equity markets had a positive month, led by Taiwan and Korea, followed by Japan. The information technology and financial sectors performed well. Chinese markets saw gains, with the consumer price index rising to 0.7%, allaying deflation concerns. Korea's markets advanced, propelled by the information technology and healthcare sectors, with the Bank of Korea forecasting 2.1% economic growth for 2024. Taiwan's markets thrived on strong IT company performance, with GDP up by 4.9% year-on-year. Japan's stocks rose as the yen weakened and the export-heavy industrials sector benefited. Australian stocks gained ground, led by financials and materials, amid ongoing economic challenges.

Emerging equity markets had a positive month, with Asia leading as the strongest performing region driven by Taiwan and Korea. Latin American equities lagged, with Brazil declining despite showing economic resilience in the face of high interest rates. China's equity markets saw positive movements, particularly in the communication services and materials sectors, although healthcare sectors detracted. In India, the equity market made marginal gains after facing early selling pressure, with the information technology sector facing particular challenges. However, the Indian economy remained robust.

The S&P GSCI Index achieved a modest gain in the second quarter. Industrial metals and precious metals were the strongest components of the index, while agriculture was the weakest. The price of zinc rose sharply within industrial metals, while silver achieved strong gains in precious metals, and gold saw a more muted increase. The energy sector posted a modest gain, driven by a robust rise in natural gas prices. In agriculture, a significant price gain for coffee was unable to offset weaker prices for cotton, corn, cocoa, and sugar.

Overall, March saw a positive movement across global equity markets, buoyed by strong performances in specific regions and sectors. Investors remain optimistic about the prospects of interest rate cuts and continued economic recovery.