Europe | 30.4 % | 52.2 % | 82.6 % |
North America | 58.8 % | 14.9 % | 73.7 % |
Latin America | 1.0 % | 12.6 % | 13.6 % |
Asia | 7.9 % | 2.7 % | 10.6 % |
Eastern Europe | - | 8.9 % | 8.9 % |
Africa | - | 5.2 % | 5.2 % |
Asia-Pacific | 1.6 % | 1.5 % | 3.1 % |
Middle East | 0.2 % | 2.2 % | 2.3 % |
Total | 100.0 % | 100.0 % |
Market environment
February was a turning point for the disinflation trend that had been shoring up the markets over previous months. Economic data brought more pleasant surprises on both sides of the Atlantic, but the (dis)inflation trend disappointed investors. While share indices continued to benefit from growth being stronger than anticipated, bonds performed much less glowingly, with traders forced to lower their expectations of central bank rate cuts in 2024. In the United States, leading and lagging indicators seem to be converging towards a single sustained growth scenario. Both the manufacturing and service components of PMIs improved, and consumer confidence picked up further in February, showing businesses’ and households’ shared enthusiasm about the economic outlook. This US economic exceptionalism results from the knock-on effects of a growing labour market, on which job reports were surprisingly positive once again. However, this frenetic growth seems to impinge on the immaculate disinflation scenario that had been underpinning traders’ risk appetite. The US Federal Reserve chair therefore took a less dovish than expected tone, driving up yields. The 10-year Treasury yield gained 34 bps over the month, reversing last December’s bond rally. Albeit to a lesser extent, the Eurozone also showed signs of progress with leading indicators still rebounding as the services sector expands. Inflation slowed by less than expected due to the robust services component of core inflation. This combination of firmer growth and more dogged inflation led to the 10-year Bund yield gaining 25 bps, while credit assets made further progress as high yield spreads narrowed by 23 bps. Chinese equity markets showed signs of recovery thanks to the restrictions placed on short selling and the Caixin PMI’s resilience. Japan’s complacent monetary policy seems even more likely to end with the publication of higher-than-expected core inflation, above the 2% mark for the 11th month in a row. The reporting season was in full swing, with AI companies again beating all records. For example, NVIDIA, the global leader for graphics cards, increased its net income ninefold in the fourth quarter, and a number of AI firms announced similar accelerations. Overall, corporate earnings were higher than investors were expecting, fuelling the strong equity rally. However, if we exclude the Magnificent Seven – the main US tech leaders – then EPS growth for the S&P 500 was slightly negative.