Developed market (DM) equities stumbled into month-end (MSCI World -0.7% MoM) as risk aversion increased. Weaker-than-anticipated economic data, including gauges of US consumer and business sentiment, combined with increased geopolitical uncertainty to push investors into the less risky parts of investment markets. Tesla (-28% MoM), Alphabet (-16% MoM) and Amazon (-11% MoM) led the Magnificent Seven grouping of mega-cap tech stocks lower. Tesla’s share price drop saw its market cap fall below US$1trn as its European sales fell 45% in January, even as overall electric vehicle (EV) sales rose 37%. Google’s parent company, Alphabet, reported earnings in early February, with revenue growth falling short of expectations. Chief Executive Sundar Pichai disappointed investors with a pledge to continue increasing capex. For a second consecutive month, value shares (MSCI World Value +1.6% MoM) outperformed their growth peers (MSCI World Growth -2.8% MoM). S&P 500 consumer staples companies (+5.7% MoM) were the best-performing counters in February.
Emerging market (EM) stocks managed to eke out a gain in February (MSCI EM +0.5%) thanks to a strong performance from Chinese companies, particularly those listed offshore. Chinese companies listed in Hong Kong were up 14% MoM, while those listed in the US were up 9% MoM. China’s President Xi Jinping met with many of China’s top private sector leaders in February, and investors took this as a sign that the long-marginalised private sector is now seen as key to reviving that country’s economy.
US rates fell in February, with the US government’s 10-year borrowing rate ending the month 0.3% lower at 4.2% p.a., with bonds supported by general risk aversion and a comment from the new US treasury secretary, Scott Bessent, that the Trump administration is focussed on getting yields and the US dollar lower. Softer US rates helped push the US dollar lower, with the greenback weaker for a second consecutive month (US Dollar Index -0.7% MoM). Brent crude oil fell to US$73/bbl in February (-5% MoM), as the US administration’s push to end the war in Ukraine increased the prospect of Russian oil supply finding its way back into the broader global supply chain.
