Global stock markets rose last week after a slow start to the year. The key driver last week was the US market which itself was boosted by the big technology names which carry such a large weight (nearly 30%) in the US index. There was also some excellent performance from Japanese stock markets which is a boost for the Magnus portfolios as we carry an overweight position to this region. This week the focus is very much on the UK, with lots of companies providing their 4th quarter / Christmas trading statements and also some key economic data being released: namely inflation, jobs and retail sales.
Last week
- Global stock markets had a strong week
- US tech shares bounced back
- Japanese stock markets were very strong indeed
- Corporate earnings were mixed: banks had excellent profit numbers last year but don’t expect to do so well this year (cos interest rates are expected to be lower)
- Bond markets gave up some ground after their strong recent run
- Economic data was thin on the ground but was generally better-than-expected
This week
- US stock markets are closed today for Marth Luther King day, but open tomorrow with Goldman Sachs reporting their 4th quarter earnings numbers
- Lots of UK companies provide 4th quarter trading updates this week (e.g. Card Factory, Smiths Gorup, Currys, Dunelm, Boohoo and Burberry)
- UK jobs data is out tomorrow, and inflation numbers are out on Wednesday: CPI is expected to come in at 3.8%. UK retail sales data is out on Friday.
- Chinese growth numbers for the 4th quarter are released on Wednesday.
Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.
More detail
- Global stock markets rose by 1.3% last week. This rise was powered by gains of 1.7% in the US stock market (which comprises c70% of the global stock market). Within the US share market, most of the gains were driven by the big US technology names. Technology makes up close to 30% of the US share market and the darlings of 2023 rose heavily last week. Nvidia was up by 11.3% on the week, Meta up by 6.3% and Microsoft was up by 5.5%.
- Last week also saw the unofficial start of the US corporate earnings season. Friday saw some of the big US banks report and the picture was fairly mixed. On the plus side, their profit numbers for last year were very strong, but on the negative side, they guided towards lower profit numbers for this year due to interest rates being expected to fall. JP Morgan (the biggest bank in the US) reported $90 billion of net interest income (bank-speak for profit on loans), which is a record profit number for any bank ever! The expected rate of overall earnings’ growth for the US market in Q4 is 1.6%, which would make for calendar year earnings’ growth for 2023 of 0.5%.
- Japanese share markets had a particularly good week, rising by 6.3%. This is a benefit to the Magnus portfolios as these hold the M&G Japan Equity Fund. These gains have taken the Japanese stock markets to their highest levels in 34 years, although they still remain about 13.5% below the peak that they reached in 1987!!
- UK share markets gave up some ground last week. Within the UK market, it was the large oil and gas companies which drove the losses on the back of the declining oil price.
- UK bond markets gave up some ground last week after an excellent December (their best month since Brexit). However, it was a different picture in the US, with US Treasury bonds rising by 0.7% on the week which is good news for the Magnus portfolios as we have a holding in these bonds. Elsewhere in fixed interest markets, credit spreads tightened a bit, with high yield bonds doing well – which in turn benefited the short-dated holdings that that the Magnus portfolios hold via the Axa US Short Dated High Yield bond fund.
- In terms of economic data, the key developments over the week were:
- US inflation came in a touch higher than expected at 3.4% vs expectations of 3.2% (it had been at a level of 3.1%). The rise was mostly driven by services costs and shelter (rent costs)
- UK growth data (GDP) came in a bit better than expected: the economy bounced back by 0.3% in November vs expectations for a 0.2% rise. However, the 3-month number to November was -0.2% which was 0.1% worse than expected and highlights that recession risk still looms (although this is very much priced into markets!)
- Chinese inflation came in at -0.3%. This was 0.1% higher than expected, but still represents the 3rd monthly decline in this number and raises expectations of increased government support to boost the ailing economy.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article should not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
