The week that was

Global equity markets traded sideways last week, with international markets outperforming the US as concerns relating to private credit and tech valuations weighed on sentiment. The S&P 500 fell 0.7%, pushing it to its worst monthly return in almost a year, whilst the equal‑weighted measure continued to outperform as it benefited from a rotation out of mega‑cap tech. European equities closed up 0.5% on the week, with more value segments of the market, such as Utilities and Energy, outperforming.

Global bonds moved up modestly on the week, with the US 10‑year falling below 4% for the first time in three months. Global commodities (+1.4%) continued their robust start to the year with elevated tensions between the US and Iran resulting in oil prices trending 1% higher on the week.

Summary economic releases

The week ahead

Markets in Asia have trended lower this morning on the back of US/Israeli strikes on Iran over the weekend. Oil prices have spiked this morning by 8–9% but are off the highs on expectations that the military conflict and any disruption to the Strait of Hormuz, which accounts for a fifth of the world’s crude flow, won’t be long-lasting. Safe‑haven assets such as gold have climbed over 2.0% whilst the DXY is up 0.7% as the US is less impacted by disruption to oil and gas flows than its Asian and European counterparts.

Corporate earnings season is in its latter innings, but there are still a number of market‑moving releases, particularly from the Irish domestics in the week ahead. Investors will be particularly interested to see if trends seen in Bank of Ireland’s results (solid loan and AUM growth, cost control and good capital generation) are replicated in AIB and PTSB, with any update on the potential takeover of the latter garnering significant attention.

Elsewhere, ICG, Cairn Homes and FBD will provide insight into travel, property and insurance spending in the Irish economy. Earnings beat rates in Europe are running at just over 23%, with sectors such as Defence and Banks seeing among the best upward revisions. In the US, close to three-quarters of companies have beaten expectations, led by the Mag‑7, which has posted 27% growth, however the ability of the 493 to deliver earnings growth (+10%) at more than double the market expectations has been key to the rotation trade year to date. This week, Costco and Target will provide greater insights on the strength of the US consumer, whilst Broadcom will provide further clues on demand for AI.

It will be a busy week on the macro front, starting with Tuesday’s Eurozone core inflation data, which is set to hold steady at 2.2% for February and leave the ECB to focus on the succession race for President Lagarde, with Dutchman Klaas Knot currently the front runner. On Wednesday, the UK will release its spring forecasts however, it is unlikely to alter the medium‑term outlook. Similarly on Thursday, China’s new five‑year plan is released, but is likely to just recommit to a 4.5–5% growth target rather than be a catalyst for the Asian economy.

Across the Atlantic, a slight softening is expected in both manufacturing and services industrial activity for the month of February, but both measures will remain in expansionary territory. Finally on Friday, US Retail Sales for January will be watched closely with potential for the headline numbers to disappoint due to colder weather in recent months. This cold patch could also have negatively affected Non‑Farm Payrolls, which are forecast to come in at 60K for February, effectively a neutral rate that keeps the unemployment rate unchanged and should also keep the Fed on the sidelines until its new chair takes the helm in June.

Clearly, geopolitical developments in Iran will be in focus; however, historically, these risk events tend not to result in sustained volatility with US equities, for instance, typically higher one month post the commencement of these events, nonetheless, safe havens such as gold and sectors such as Defence will be well bid short term.

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more detail on individual securities, or to discuss how we can support your investment needs, please get in touch.

Written by John Mullane, CIO, Cantor Fitzgerald Ireland