February was a broadly positive month for equities, with China rebounding from its slump at the start of the year and the US market reaching new highs amidst a bumper earnings season.

The UK market continued to lag, despite inflation for January coming in slightly lower than expected at 4%. The latest economic data from the ONS showed that the UK entered a technical recession at the end of last year as its GDP declined 0.1% in Q4 2023 following a 0.3% drop in Q3 2023.

Nvidia, the AI chip producer, overtook Amazon to become the third largest company in the S&P 500 behind Microsoft and Apple as it published record earnings. Despite the increase in its bottom line, its price-to-earnings (P/E) ratio, namely the ratio of its market value to its annual earnings, remains very high at over 70. In comparison, the FTSE 100 index, which tracks the largest UK companies, has a P/E ratio of just over 10.

“The UK is currently seven times cheaper than Nvidia in terms of its earnings.” – James Timpson, Fund Manager, Courtiers Multi-Asset Funds

Full round-up of February market performance

In the UK, the FTSE 100 index gained 0.45% while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, dropped 2.14% and 1.43%. In the US, the S&P 500 USD index gained 5.34% while in Europe the Eurostoxx 50 EUR index climbed 5.08%. Japanese stocks measured by the Topix JPY index rallied 4.93%.

Emerging markets returns were mostly positive, with the MSCI Emerging Markets index rising 5.11% in local currency terms. Latin American equities, measured by the MSCI Latin America local currency index, rose 0.17% while Indian stocks measured by the Nifty 50 INR index gathered 1.18%. Chinese stocks measured by the MSCI China CNY index jumped 8.59%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, declined 1.11% with long dated (over 15 years to maturity) gilts falling 1.29%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, slipped 0.64%. In the high yield market, the Bank of America Merrill Lynch Sterling High Yield index grew 0.70%.

In the commodities market, the S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, rose 0.87%. Brent crude oil futures amassed 3.18% during the month. In the precious metals markets, the S&P GSCI Gold and Silver indices dropped 0.19% and 1.74% in USD respectively, while in the agricultural markets as corn and wheat futures dipped 7.25% and 2.98% in USD respectively.

In the currency markets, it was a mixed month for the pound as it depreciated 0.50% versus the US dollar and 0.38% against the euro but gained 1.57% versus the yen.