Global equities were up last week with the Nasdaq hitting new all-time highs but it was Europe that led the way, buoyed by hopes of an economic stimulus package in China, a crucial trading partner. That left global equities up by over 1% and up over 2% for the month. Even though the Aussie Dollar rebounded a bit last week it is still 3% down for the year to date (a silver lining for Australian investors which means that their unhedged international equities are up some 5% this year). Emerging markets also posted a solid rise of 1.4% on China optimism as well as resurgent South American economies. Still, it was positive economic data out of the US, a few decent corporate results, and a spike in consumer confidence to the highest since 1991 that really underpinned the recent rally, and which has kept bond yields rising again. This contrasts signs of slowdown seen in places like Europe, the UK, Canada, and China.

The Australian share market finished the week on a strong note after a weaker start to the year, with the S&P/ASX 300 Index gaining 1.8%. The materials sector led the gains, surging 3.1% on that China news while commodities in general were a sea of green with energy, industrial and soft commodities up across the board by 4-8%. Locally however, the latest NAB survey showed moderating business conditions and inflation pressures, an encouraging sign for the RBA but maybe less positive for the economy.  As the Australian reporting season approaches there were a few small bombs as Nanosonics and Dominos both guided lower ahead of late February results. This may prove to be an early confession session but other companies will have noted the fairly savage reaction with both companies down by 30% on news that was disappointing but not exactly disastrous.  Local Real Estate Trusts on the other hand showed some resilience and were up for the week while recently out of favour healthcare stocks Resmed and CSL were also among the strongest contributors.  

The US reporting season has hinted at a similar dynamic of broad weakness disguised by individual (mainly AI related optimism). Texas instruments, which supplies relatively mundane silicon chips to industry and car manufacturers was down on the week after reporting strong cash-flow but flagging falling demand. Tesla joined them as one of the biggest negative contributors.  Meanwhile Nvidia and ASML, both dominant elements of the high-tech chip supply chain that is crucial for AI were the biggest contributors for the week. A strong result from Netflix also helped the tech sectors. The real market moving news will be this week, however, as Microsoft, Alphabet, Amazon, Apple, and Meta all report their earnings.  

Upcoming US Q4 GDP, durable goods and core inflation data will also provide some critical evidence on whether resilient growth and moderating inflation will be sustained. This could well confirm market expectations for Fed rate cuts later this year, or otherwise.

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