Global Markets in Review: Mixed Signals Prevail

Last week, the MSCI All Country World Index (MSCI ACWI) showed resilience, gaining 1.3%, partially recovering from a year-to-date loss of 0.3%. In the US, the S&P 500 Index recorded a 1.9% rise, contributing to a 0.3% year-to-date gain. Noteworthy performers included tech giants like Meta Platforms and NVIDIA. However, energy stocks lagged due to oil price pullbacks.

Growth stocks outshone value shares, with the Russell 1000 Growth Index returning 3.7%, while the Russell 1000 Value Index dipped by -0.3%. The Nasdaq Composite Index rallied by 3.1%.

In Europe, as traders gauged the possibility of prolonged higher interest rates, the MSCI Europe ex UK Index added a modest 0.2%. Major stock indexes in Germany, France, Italy, and Switzerland experienced positive movements. The UK, however, saw a decline with the FTSE 100 Index dropping by -0.8%.

Japan’s stock markets, buoyed by stimulative monetary policy and a weaker yen, posted robust gains. The TOPIX Index surged by 4.2%, reaching its highest level in almost 34 years.

In Australia, the S&P ASX 200 Index showed a modest uptick of 0.1%, offsetting downward pressure from iron giants. Australian government bond yields eased, resulting in a slight weakening of the Australian dollar against the US dollar by -0.1%.

Key Economic Insights: UK, US and Europe

United Kingdom

The UK economy demonstrated resilience, growing by 0.3% in November. Strong gains in services and industrial businesses reversed the previous month’s decline. However, over the three months through November, the economy contracted by -0.2%, reflecting widespread weakness across manufacturing industries.

United States

In the US, economic data aligned with expectations. Inflation data drew attention, with headline prices rising 0.3% in December (3.4% year on year). Core prices, excluding food and energy, also rose by 0.3%. Encouragingly, producer prices fell -0.1% in December, marking the third consecutive monthly decline. Labour market indicators were positive, with low unemployment remaining inline with expectations.

Europe

European Central Bank (ECB) President Christine Lagarde expressed optimism, stating that “the worst part is behind us” regarding inflation. She hinted that interest rates might have peaked but refrained from specifying when rate cuts might occur. Labour market resilience was evident in the euro area, with the unemployment rate dropping to 6.4% in November.

Looking Ahead: Anticipating Market Trends

As we enter the new week, it remains to be seen whether the recent trend of lower yields and higher equity indices will persist. The looming Fed rate decision adds a layer of anticipation. Key data releases include more inflation data from Canada, the UK, and the Eurozone, along with US retail sales.

Note: Market conditions are subject to change, and this overview is based on information available at the time of writing.

Sources: Reuters, Bloomberg, CNBC and Financial Times

FAQs

1. What factors contributed to the global market’s performance last week?

The MSCI All Country World Index gained 1.3%, with variations across regions. In the US, the S&P 500 rose 1.9%, driven by notable performances in tech stocks and earnings reports from major banks.

2. Why did growth stocks outperform value shares?

Growth stocks, exemplified by the Russell 1000 Growth Index, returned 3.7%, while value shares lagged at -0.3%. This trend was observed amid the ongoing recovery and positive sentiments in the tech sector.

3. How did major European markets respond to interest rate speculations?

European markets, including Germany’s DAX and France’s CAC 40, advanced as traders assessed the possibility of prolonged higher interest rates. The MSCI Europe ex UK Index added 0.2%.

4. What were the key factors influencing Japan’s stock markets?

Japan’s TOPIX Index soared by 4.2%, reaching its highest levels in nearly 34 years. Stimulative monetary policies and the yen’s weakness, beneficial for exporters, were key drivers.

5. What impacted the UK economy’s growth in November?

The UK economy grew by 0.3% in November, reversing a previous decline. Strong gains in services and industrial businesses offset weaknesses, but the three-month contraction reflected challenges in manufacturing.

6. How did the US labour market perform in early January?

The Labour Department reported that 202,000 workers filed for unemployment benefits, marking the lowest number since mid-October. Continuing claims also hit their lowest levels, showcasing a robust labour market.

7. What were the inflation trends in the US and Europe?

In the US, consumer price inflation for December was 0.3%, slightly higher than expected. Core prices also rose by 0.3%. In Europe, ECB President Christine Lagarde hinted that the worst part of inflation might be behind, but rates had probably peaked.

8. How did major currencies perform in the forex market?

Currencies varied, with the euro appreciating against the US dollar. The British pound strengthened, while the Australian dollar slightly weakened.

9. What data can we expect in the upcoming week?

Key data releases include more inflation data from Canada, the UK, and the Eurozone, along with US retail sales. Markets remain attentive to trends in yields and equity indices, especially with the next Fed rate decision on the horizon.

10. How should investors navigate the current market trends?

Investors are advised to stay informed, diversify portfolios, and consider long-term goals. Market conditions are subject to change, and it’s crucial to adapt strategies based on evolving economic landscapes.

If you have specific questions or concerns about your investments, don’t hesitate to reach out to our financial advisers for personalised guidance and recommendations.