The Long and Short of it, week ending 19 Jan 2024
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Stock markets moved higher again last week and once again the Nasdaq Composite Index sharply outperformed both the S&P 500 Index and the Dow Jones Industrial Average. All 3 indexes moved lower through Wednesday, hurt by diminishing rate-cut expectations exacerbated by a stronger-than-expected retail sales release Wednesday. Thursday’s improved outlook forecast by Taiwan Semiconductor pushed chip-related stocks even higher, benefiting, in particular, the Nasdaq Composite Index but providing upward momentum to the S&P 500 Index and the Dow Jones Industrial Average as well. A lower-than-expected initial jobless claims number combined with improved consumer sentiment (as measured by the University of Michigan Consumer Confidence Index) added to rate-cut uncertainty and capped stock market gains. Reflecting “higher-rates-for-longer” concerns, the 10-year Treasury rate rose 19bps, almost entirely due to rising 10-year real rates, and the U.S. dollar strengthened just under 1 percent. For the week, the S&P 500 Index rose 1.2% to 4,839.81, the Nasdaq Composite Index gained 2.3% to 15,310.97, the Dow Jones Industrial Average increased 0.7% to 37,863.60, the 10-year U.S. Treasury rate 18bps to 4.13% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.8%.
European stock markets ended the week lower, pressured by diminished rate-cut expectations inf front of this week’s ECB meeting. Both the STOXX 600 and FTSE 100 Indexes moved lower through Wednesday, hurt by hawkish ECB officials’ comments (STOXX 600 Index) and a much higher-than-expected UK inflation release (FTSE 100 Index). Both indexes moved higher Thursday, with the STOXX 600 Index benefiting from strong luxury stock performance following Richemont’s better-than-expected revenues (due to increased sales in China) and with the FTSE 100 Index reacting positively to a much weaker-than-expected retail sales release. Friday saw relatively small index level changes, leaving both indexes down for the week. Both 10-year Gilt and Bund rates rose more than 10bps, reflecting lowered rate-cut expectations. For the week the FTSE 100 Index fell 2.1% to 7,461.93, the STOXX 600 index decreased 1.6% to 469.24, the 10-year Gilt rate rose 13bp to 3.93%, the 10-year Bund rate increased 16bps to 2.30% and the British pound and euro weakened 0.4% and 0.5%, respectively, versus the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | 3x Long Vodafone (3LVO) | +0.1% | 3x Short Glencore (3SGL) | +29.6% |
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The Long and Short of it, week ending 19 Jan 2024
