In contrast to January, where we saw a general rise in the main stock markets, the tone of the markets turned decidedly more negative in February. The main culprit for this change in direction was the release of some worse-than-expected inflationary data in both Europe and the United States. Upward surprises in economic growth as well as inflation that is struggling to decline significantly have had a consistent impact on expectations regarding the timing and magnitude of future central bank rate hikes, causing a slowdown in the stock market in February and a further sharp rise in bond yields especially those on short maturities.
Although the Federal Reserve, at its last meeting earlier this month, decided to opt for “only” a 0.25% hike, its Chairman Powell stated that rates should rise again and remain high later this year but also that the disinflation process has begun. The European Central Bank has decided a 0.50% increase and anticipated that the next move will be of the same magnitude, and then consider how to proceed based on available data.
The performance of stock indices was not homogeneous last month, as in the United States we saw a retracement from the January rally, S&P500 -3.6% and Nasdaq -3%. European indices continued their rise with Euro Stoxx 50 +1.60% and DAX +1.20%.
The better performance of the European indices is explained by the different performance of sectoral indices: the correction of technology stocks and the rise of financial and energy stocks inevitably penalized the Nasdaq in favor of the European indices, where stocks in these two sectors prevailed. Also negative was the Swiss stock exchange SMI with -0.90%. Asian markets also contrasted, with Nikkei index performing +0.28% month-on-month while Hang Seng fell -10.3%.