Introduction

February 2024 saw global markets resume their upward trajectory as confidence in a 2024 rate-cutting cycle solidified. While macroeconomic data remained mixed, investor sentiment improved following dovish signals from major central banks and easing inflationary pressures. Equities advanced across all major regions, bond yields stabilised, and commodities responded to geopolitical developments and firming global demand expectations.

United States

U.S. equities rallied in February, with the S&P 500 rising 5.2% and the Nasdaq Composite up 6.1%, both reaching new record highs. The rally was driven by resilient corporate earnings, optimism around artificial intelligence, and growing expectations for a Federal Reserve rate cut by mid-year.

The January CPI report (released mid-February) showed headline inflation at 3.1% and core inflation at 3.6%, slightly above expectations but consistent with the disinflationary trend. Fed officials reiterated their data-dependent approach, with markets now pricing in the first cut around June. Meanwhile, labour market strength persisted, with unemployment holding at 3.7%.

Europe

European markets gained modestly in February. The Euro Stoxx 50 rose 2.3%, led by industrials and financials. Germany's DAX and France's CAC 40 also posted gains despite continued economic stagnation in core economies. Improving consumer sentiment and easing energy prices contributed to the rebound.

The European Central Bank held interest rates steady and struck a more balanced tone, acknowledging progress in inflation but warning that premature easing could be risky. Eurozone inflation continued to ease, with headline CPI falling to 2.6% and core CPI at 3.1%. Bond yields across the region remained stable.

Asia-Pacific

Asia-Pacific equities were mixed. Japan's Nikkei 225 surged 7.9%, reaching an all-time high and surpassing its 1989 peak. The rally was supported by strong earnings, yen weakness, and continued foreign inflows. The Bank of Japan remained dovish but signalled it was preparing to phase out negative interest rates by mid-2024.

Chinese markets stabilised. The Hang Seng Index rose 3.7% and the Shanghai Composite gained 2.5%, buoyed by pre-Lunar New Year stimulus announcements and state-backed buying. However, sentiment remained fragile amid property sector concerns and weak private sector investment. Australia's ASX 200 rose 1.9% as the RBA left rates unchanged and signalled a neutral bias.

Emerging Markets

Emerging markets rebounded in February. The MSCI Emerging Markets Index climbed 4.1%, supported by improved global risk appetite, a softer U.S. dollar, and falling real yields. Asia ex-China, India, and Latin America outperformed.

India's Nifty 50 rose 2.4%, bolstered by strong economic growth, upbeat Q3 earnings, and continued foreign institutional inflows. Brazil's central bank cut rates by another 50 basis points, and the Bovespa advanced 3.2%. Turkey and South Africa saw modest gains as inflation pressures began to moderate.

Commodities

Oil prices edged higher in February. Brent crude rose to USD 83/barrel, supported by production disruptions in Libya and geopolitical risk in the Red Sea. Demand forecasts from OPEC and the IEA were upgraded modestly, adding upward pressure on prices.

Gold closed the month at USD 2,066/oz, buoyed by stable real yields and investor interest ahead of expected central bank easing. Copper and industrial metals also rallied, with copper up 5.1% for the month, supported by supply-side constraints and improved demand signals from China.

Fixed Income & Currencies

Bond markets were largely stable. The U.S. 10-year Treasury yield ended the month near 4.25%, little changed from January. Credit spreads tightened slightly across both investment grade and high yield markets, reflecting improved sentiment.

The U.S. dollar weakened slightly against major peers. The euro, yen, and Swiss franc appreciated modestly, while the Singapore dollar remained steady on the back of trade stability and MAS policy consistency. Emerging market currencies were broadly stronger, especially in Latin America and Southeast Asia.

Outlook

February reaffirmed that 2024 could be a year of transition - out of restrictive monetary policy and toward more balanced macro conditions. Markets are increasingly focused on the timing and pace of central bank easing, corporate earnings revisions, and the resilience of global growth in the face of still-tight conditions.

Brightness Capital & Asset Advisory remains constructive on risk assets but continues to advocate for discipline and quality across portfolios. We favour sectors benefiting from AI, infrastructure, and policy tailwinds, while remaining active in managing interest rate exposure and currency volatility across developed and emerging markets.