The prospect of imminent interest rate cuts seemed less likely in many major economies this month due to resilient economic data, though inflation remained sticky. Equities generated muted returns though Japan outperformed. Read on to learn more about what happened on the global stock markets in February.

Whilst this article focuses in the main on February 2024 market news, there are references to events and market performance from previous months.

US

After several months of positivity, consumer confidence fell in February as a result of concerns about the labour market and the political landscape¹.

Inflation continued to fall in the US at the start of the year, dropping from 3.4% in December to 3.1% in January, but remained above economists’ expectations².

The Purchasing Managers’ Index (PMI) showed that economic growth continued to move in the right direction in February though it had slowed since January. The index fell to 51.4 in February from 52 in January³ . This data indicates that the economy is growing, albeit slowly⁴ – a measure above 50 suggests economic growth, while below 50 suggests contraction.

Despite these challenges, US equities performed well last month. In fact, it was the best February for both the Nasdaq and S&P 500 since 2015⁵. The S&P 500 rose by 5.3% and the Nasdaq Composite rose by 6.2%⁶.

UK

In January, headline inflation was unchanged from December at 4%⁷. In February, the British Retail Consortium reported that food inflation fell to 5% year-on-year, helped by supermarket competition and falling energy prices⁸.

Data also showed that wage growth fell more slowly than expected in the final quarter of 2023. Earnings growth excluding bonuses fell to 6.2% in Q4, down from 6.7% in Q3⁹.

The sticky inflation data as well as wage growth findings led economists to scale back their expectations of rate cuts by the Bank of England (BoE). Goldman Sachs now predicts that the BoE will hold rates higher for longer, before cutting them more sharply than previously anticipated in the second half of 2024¹⁰.

UK stocks lagged behind several international peers in February. The FTSE 100 fell 1.2% for the month, while the FTSE 250 gained 0.2%¹¹.

Europe

There were signs that economic activity may be recovering in the eurozone in February¹². Though the economic downturn in Germany worsened, business confidence strengthened in France as the recent dip in economic activity there eased¹³.

Inflation fell to 2.6% in February, though this was marginally higher than economists expected¹⁴. The prices for food, alcohol, and tobacco rose by 4%, the highest inflation rate, closely followed by services at 3.9%¹⁵.

European equities achieved muted returns in February. The MSCI Europe ex-UK rose 2.8%¹⁶.

Asia

The Chinese government announced further measures to support the economy in February. This included a cut to its five-year loan prime rate from 4.2% to 3.95%, although the one-year loan prime rate remained unchanged at 3.45%¹⁷. The government hopes that the cut will help to end the ongoing property crisis that has weighed on the economy since 2021¹⁸.

The Chinese New Year led to optimism as equities rose after the holiday. The CSI 300 rose by 0.5% on the Monday following the national holiday, when consumer spending returned to levels last seen before the Covid pandemic¹⁹. The MSCI China rose 8.6% across the month²⁰.

Elsewhere in Asia, Japanese stocks continued to outperform. The Nikkei 225 index achieved a 30-year high in February, and the TOPIX index returned 4.9% across the month²¹.

What this means for you

February was a somewhat muted month on the stock markets, though economic data from around the world was generally positive. You may have noticed that interest rate cuts have been anticipated for some time. Though many expect cuts around the world this year, the data that these decisions are based on is continually changing, making it impossible to predict exactly when this might happen.

This is the case for your investments too – often, stock market performance is influenced by a range of factors, many of which can’t be predicted ahead of time.

As such, it can be helpful to tune out the noise of the headlines and avoid speculating. Instead, it’s usually more sensible to focus on your personal circumstances and long-term goals, and build a balanced portfolio that aligns with your personal attitude to risk.

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

Past performance is not a reliable indicator of future performance. The value of your investment (s) and the income derived from it, can go down as well as up and you may not get back the full amount you invested.

Sources:

¹ 27.02.2024 | US consumer confidence ebbs in February; inflation expectations fall | Reuters
² 13.02.2024 | US inflation hotter than expected in January at 3.1% | The Guardian
³ 22.02.2024 | US flash PMI indicates steady growth in February as price pressures cool further| S&P Global
⁴ 22.02.2024 | US flash PMI indicates steady growth in February as price pressures cool further | S&P Global
⁵ 01.03.2024 | Stock market today: S&P 500, Nasdaq hit fresh records to cap best February in nearly a decade | Yahoo Finance
⁶ 02.03.2024 | February 2024 Review and Outlook | Nasdaq
⁷ 14.02.2024 | Consumer price inflation, UK: January 2024 | Office for National Statistics
⁸ 27.02.2024 | February dip sends UK food price inflation to nearly two-year low | The Guardian
⁹ 13.02.2024 | UK pay growth slows less than expected as workers bid up wages | The Guardian
¹⁰ 20.02.2024 | Bank of England rate cuts likely later but larger, Goldman Sachs says | CNBC
¹¹ 29.02.2024 | UK stocks end up on earnings bump; Haleon, Howden shine | Reuters
¹² 22.02.2024 | Euro zone business activity inches towards growth in Feb, survey shows | Reuters
¹³ 22.02.2024 | Euro zone business activity inches towards growth in Feb, survey shows | Reuters
¹⁴ 01.03.2024 | Inflation remains sticky in Europe, with core prices cooling less than expected | CNBC
¹⁵ 01.03.2024 | Inflation remains sticky in Europe, with core prices cooling less than expected | CNBC
¹⁶ 01.03.2024 | Review of markets over February 2024 | J. P. Morgan
¹⁷ 20.02.2024 | China makes biggest-ever cut to key mortgage rate to bolster housing market | CNN
¹⁸ 20.02.2024 | China makes biggest-ever cut to key mortgage rate to bolster housing market | CNN
¹⁹ 19.02.2024| China markets rise as upbeat holiday travel data lifts tourism stocks; Hong Kong shares fall | CNBC
²⁰ 01.03.2024| Review of markets over February 2024 | J. P. Morgan
²¹ 01.03.2024 | Review of markets over February 2024 | J. P. Morgan

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