Strong guidance from Nvidia boosted technology stocks and pushed the S&P500 index to a new record high this week. Nvidia reported a dramatic +265% increase in sales compared to a year earlier and reported $22.1bn of revenue in Q4. It has now become the third most valuable US-listed company and contributed more than a quarter of the S&P500’s year-to-date growth. Investors’ enthusiasm about the potential of artificial intelligence helped broader market risk-on sentiment. Nikkei surpassed its all-time high, exceeding the record level reached during the country’s late-1980 asset bubble, and recorded an almost +17% gain over 2024 so far. German DAX index and French CAC40 index both also closed at all-time high, with tech stocks the largest drivers of market gains.
In the US, policy makers saw no urgency to cut interest rates after the strong January employment report and the overshoots to the Consumer Price Index (CPI) and Producer Price Inflation (PPI). The Fed’s January meeting minutes reflect that the Committee “remained highly attentive to inflation risk”, and the Fed needs to see more data pointing to declining inflation toward the 2% target. Investors dialled back their expectations for rate cuts at the Fed’s March meeting as a result. In the Eurozone, the European Central Bank (ECB) wage tracker slowed in 4Q to 4.46% from 4.69%, and 2024 growth forecasts for some countries, such as France and Germany, continued to be revised down. Slowing wages and economic growth increase the possibility of a dovish tweak in the ECB March meeting. The Bank of England Governor Andrew Bailey highlighted that market expectations of rate cuts are “not unreasonable” and that inflation does not need to fall to target before rates can be cut.