Tech Optimism Drives US Stocks Higher
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The S&P 500 Index rose 0.21% for the week, the Nasdaq 100 increased 0.54% and the Dow Jones was flat. The continued optimism surrounding the possibilities of generative artificial intelligence seemed to contribute to the growth of the indexes, particularly benefiting the technology focused Nasdaq Composite. Additionally, energy company stocks performed well last week, supported by positive job reports and optimistic consumer sentiment data, leading to a rebound in crude oil prices.
The STOXX Europe 600 Index surged 1.30%. Stocks were influenced by the anticipation of central banks potentially reducing interest rates in the upcoming year due to sluggish inflation and indications of weakening European economies. The European Central Bank’s (ECB) executive board member, Isabel Schnabel, conveyed a shift towards a more accommodative approach in an interview with Reuters, stating that the recent inflation figures have made the likelihood of a further rate increase less probable. Inflation has decelerated noticeably for three consecutive months, settling slightly above the ECB's target of 2%.
The CSI300 Index dropped 2.40%. Chinese equities faced a downturn following Moody's decision on Tuesday to revise its outlook for China's government bonds from "stable" to "negative". Moody's expressed concerns about the high debt levels of local governments and state-owned enterprises, which posed potential risks to the country's economy. This ratings downgrade represents another setback for China's financial markets, which have been grappling with a prolonged downturn in the property market and declining confidence among both consumers and businesses.
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Bitcoin May Secure A Seat In A Multi-Asset Portfolio
The historical obstacle of volatility, once a strong deterrent to incorporating Bitcoin into multi-asset portfolios, seems to be gradually waning. Although the annualized volatility stood above 50% in recent years, the past few months have witnessed a consistent decline. Nevertheless, Bitcoin's correlation with major assets such as stocks, currencies, and gold remains notably unstable, and an enhancement in this aspect would be beneficial for the asset.
In our view, the narrative of Bitcoin as "digital gold" is gaining traction, particularly as it has displayed resilience in the face of quantitative tightening by central banks. If this trend endures, there is a prospect that Bitcoin could find its distinct place in multi-asset portfolios in the coming years.