Equity markets performed disparately last week following concerns over the shuttering of two US regional banks and the crisis of confidence hitting Credit Suisse. US indices benefited from a recovery in tech stocks, but European counterparts were hit by their exposure to financials.

Bond yields eased, with the US 10-year yield back at 3.45% and the German equivalent at 2.10%.

US inflation continued to slow in February. The consumer price index (CPI) was up 0.4% month-on-month after rising by 0.5% in January. On a year-on-year basis, the index was up by 6%, marking its lowest level since September 2021, compared with 6.4% in January.

In another sign of slowing economic activity, the producer price index (PPI) in the US unexpectedly edged down by 0.1% in February after a 0.3% uptick in January, led lower by food prices and energy costs. On a 12-month basis, the increase was 4.6%, compared to 6% the previous month. All this points to some moderation in inflation.

Initial jobless claims fell in the week beginning 6 March fell by 20,000 to 192,000, down from 212,000 the previous week. In addition, the four-week moving average, which serves as a trend indicator for the labour market, dipped by 750 relative to the prior week to 196,500.

In Europe, inflation is not going way. The CPI rose by 5.5% year-on-year in February, in line with forecasts. In France, the index rose by 1.1% in February, taking the year-on-year increase to 7.3%, which was slightly higher than the expected 7.2%.

In response to these conditions, the ECB raised its benchmark policy rate by a further 50 basis points and hinted at more to come, despite concerns about the health of the global financial system.

The S&P 500 ended the week up 1.43% while the tech-heavy Nasdaq gained from lower bond yields to advance firmly by 4.41%. The Stoxx 600 Europe, dragged down by the banking sector, fell by 3.85%.

With the SNB due to announce its decision on further monetary tightening this week, the financial sector is likely to remain a key focus for market participants in the near term.

Source: Bonhôte

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