S&P 500 reaches a new peak, Klarna eyes IPO, HNWIs turn to alternatives

On Thursday, the US stock market experienced an upswing as the S&P 500 reached an all-time high, maintaining positivity amidst another day of closely monitored testimony from Federal Reserve Chair Jerome Powell and anticipation of Friday's unveiling of the February jobs report. Technology stocks led the charge once more, with the Nasdaq Composite climbing by up to 1.5%, while the S&P 500 achieved a record closing peak of 5,157.34, marking a gain of just over 1%. The Dow Jones Industrial Average saw an increase of approximately 0.3%.

Source: Yahoo Finance

Markets 

U.S. bond funds racked up large inflows in the seven days to March 6 as weaker manufacturing data and dovish comments from Federal Reserve officials raised expectations for interest rate cuts later this year. Data from the London Stock Exchange Group (LSEG) revealed that investors poured around $10.54 billion into U.S. bond funds during the week, marking the largest weekly net purchase since the end of June 2021.

The robust inflows coincided with indications from U.S. central bankers that, despite recent inflation pressures, overall progress could allow for possible rate reductions. Fed Chair Jerome Powell's recent testimonies solidified this outlook.

Markets are contending with the very real chance that the BOJ will raise rates as soon as this month, with traders racing to catch up after speculative positioning against the yen climbed to the highest level in more than six years last month. The yen can appreciate to 140 to the dollar (Bloomberg)

Macro  

Federal Reserve Chair Jerome Powell reaffirmed to lawmakers that the US central bank is not hastening to reduce interest rates until policymakers are convinced they have effectively tackled inflation. Speaking before a House panel on Wednesday, Powell stated that it is likely appropriate to initiate a decrease in borrowing costs "at some point this year," but emphasized that officials are not ready to do so yet.

Inflation moderated to a 2.4% rate for the 12 months ending in January, down from its peak of 7.1% in June 2022. However, price pressures picked up from December onwards, and a key indicator often cited by Powell—services prices excluding shelter and energy—continues to exceed its pre-pandemic trajectory.

Meanwhile, demand for labor has remained robust, with employers adding 353,000 jobs in January and economists predicting an additional 200,000 jobs added in February.

According to data, the euro-area economy's failure to expand in the fourth quarter was primarily attributed to a sharp decline in trade. Net exports decreased by 0.3%, compounded by a 0.1% drop in inventories, although there were gains in government spending and fixed investment.

In January, Germany's industrial production experienced its first increase in nine months, though its prolonged weakness likely already pushed it into a recession.

Japan's household spending contracted by 6.3% year-on-year in January, marking the sharpest decline in almost three years, while annual wage negotiations suggest significant wage increases. Economists have raised their growth forecasts for Singapore in the first quarter to 2.9%, partly due to factors including Taylor Swift.

Corporate News 

The CEO of Klarna is gearing up for an IPO "fairly soon." Although the company has yet to determine the location and exact timing of the share sale, Sebastian Siemiatkowski highlighted that the United States is Klarna's largest market.

Huawei and its partner SMIC reportedly relied on US technology to manufacture an advanced 7-nanometer chip last year, according to sources familiar with the matter. This revelation underscores China's ongoing reliance on foreign components and equipment. Additionally, China is raising over $27 billion for its largest chip fund to mitigate US restrictions.

Goldman Sachs is withdrawing from transaction banking in Japan, less than a year after announcing its plans to enter the business in the country.

Petrobras experienced a premarket decline in New York following disappointment over its dividend payout.

Private Credit 

According to Bloomberg, Silver Point Finance and Fortress Credit Group are collaborating as joint arrangers on a $275 million loan facility to fund Sweet Oak's acquisition of Whole Earth Brands Inc.

In a Bloomberg TV interview, Jessica Jones, Managing Director and Head of Asia at PGIM Investments, notes that high-net-worth investors are increasingly interested in expanding their allocation to private markets and alternative investments. Despite high-net-worth investors representing approximately 50% of global assets under management, they have only allocated around 16% to alternative investments, as suggested by some advisors. Many affluent investors are showing keen interest in the digital infrastructure sector, particularly data centers.

Banks and direct lending funds are in the process of developing credit packages valued up to €650 million ($707 million) to refinance the debt of Dutch testing services firm Normec, as reported by Bloomberg. This new funding would replace an existing unitranche facility provided by direct lender BlackRock in 2020, which was secured when Astorg acquired the business from Summit Partners.