Stock markets had a nice bounce last week. This was driven by some positive noises out of China (around supporting the property market) and some decent earnings’ numbers from European and US companies. This filtered through to UK companies (particularly those with exposure to China), with the UK FTSE All Share having its best week since early November. This week is action packed! We have central bank meetings in both the US and UK and also a raft of corporate earnings’ releases.
Last week
- Global stock markets rose (helped by European shares)
- The UK share market rose by 2.3%, on the back of some better than expected economic data
- US earnings season got a boost from Netflix’s numbers, but the real test will come this week
- Bond markets continued to give up some of the gains that they made in December. We’d note that the Magnus portfolios have the bulk of their exposure in short-dated bonds which continue to eke out positive returns.
This week
- It’s a busy week!
- The US Federal Reserve meeting will grab the focus on Wednesday night (we expect them to hold rates at 5.5% but the comments around the timing of the first cut will be what will move markets)
- Thursday lunchtime sees the Bank of England make their interest rate decision (expected to hold rates at 5.25% but the shape of the Committee members’ voting – especially given the recent uptick in inflation – will be the key takeaway)
- Alongside that, there’s lots of companies reporting, with Microsoft, Alphabet and Diageo on Tuesday, Boeing on Wednesday, Apple, Amazona and Meta on Thursday and Exxon Mobil on Friday.
- Friday also sees the US jobs numbers (payrolls) for January being announced
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
- Stock markets had another good week with the US stock market reaching fresh all-time-highs over the course of the week. UK share markets had a particularly good week, with the FTSE All Share rising by 2.3%. This came on the back of some better economic survey data. Specifically, PMI data for the UK came in better than expected as did measures of Consumer Confidence. The UK share market also got a boost from its companies that have exposure to China (more on that below), with names like Prudential and Burberry both up over 8.5% on the week and Diageo was also up over 5% ahead of its results this week. Diageo and Burberry both benefited from a positive read across from results of their contemporaries Remy Cointreau and LVMH which reported numbers on Friday which showed that consumers were feeling more confident / more thirsty (!) and were upping their spend on luxury goods and spirits.
- Chinese share markets rose strongly last week (after a dismal start to the year), which helped boost returns of emerging market stocks: which rose by 1.3% on the week. The Chinese authorities signaled that there would be positive measures to support the economy and, in particular, the housing market. The People’s Bank of China (PBOC) said they’d be cutting the reserve ratio requirement (RRR) by 0.5% on February 5th. There were also announcements of new loans to support the property sector and a walking back of the draft rules that had been imposed on online video games in late December.
- US share markets also had a good week, up by 0.9%, with the index getting a good boost from Netflix which rose by 18% on the week on the back of strong results which showed that they’d added 13m new subscribers in the 4th It is early days in the US Q4 reporting season (only 25% of companies have reported so far) and numbers are running a little behind expectations. This week coming will be key as we have index heavyweights such as Apple, Microsoft and Alphabet reporting alongside the Federal Reserve’s rate-setting meeting, hence markets will likely take direction off of this.
- The European Central Bank met last week and kept rates steady at 4%. Madame Lagarde’s language in the press conference that followed the meeting was quite soothing for markets. Although she reiterated that it was “premature to discuss rate cuts”, financial markets are expecting her and the Committee to make an interest rate cut in the April meeting and the rest of her comments did little to ward against this.
- UK bond markets continued to give up ground this month, with the gilt index falling by 0.4% last week. Gilts are now down 3.5% so far this month after a very strong December (where they rose by 5.4%). It is worth nothing that the fixed interest holdings in the Magnus portfolios are still skewed to short-dated bonds which continue to do well (the 3 key funds we hold in this area of the market are all in modest positive territory so far this year). We met with Nick Trindade (from Axa) last week who manages some of these bonds on our behalf and he has gradually been increasing his exposure to some of the government bonds that have sold off this month, but is still heavily biased to top quality short-dated bonds that are yielding c5.5%.
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.
