The US stock market took a bit of a breather last week and it was the turn of other equity markets to pick up the slack. UK stocks posted a good week thanks to some good bank earnings (Natwest) and some better-than-expected economic data. Japanese stocks continued their surge, and it was pleasing to see Emerging market stocks posting some decent gains after a slow start to the year. This week starts fairly quiet (with the US stock market shut today) but heats up with a slew of UK corporate data and also the results for Nvidia in the US on Wednesday – Nvidia is now a fairly big stock (c3.5%) within the US stock market and hence will have an impact on the overall market.
Last week
- Global stock markets inched up by 0.4%
- UK stock markets put in a good showing, despite the UK falling into a recession
- Japanese stock markets continued their excellent run
- Emerging stock markets had a good bounce on anecdotal good news from China
- Government bond markets sold off a touch, with the first interest rate cut now expected to be later in the year due to stronger than expected US inflation data (amongst other things).
This week
- It’s likely a slow start to the week, with US stock markets closed on Monday for Presidents’ day.
- The focus will be on UK banks this week, with Barclays reporting full year earnings on Tuesday, HSBC reporting theirs on Wednesday, Lloyds Banking Group on Thursday and then Standard Chartered on Friday. On top of this, there’s other big index names in the UK (such as the miners) reporting results too.
- Nvidia reports numbers on Wednesday which will be closely watched as they are now the 3rd largest company in the US and the stock is already up over 45% so far this year!
- It’s fairly quiet in terms of the economic calendar. The minutes from the most recent Federal Reserve meeting are released on Wednesday and key survey data (PMIs) is released later in the week for most countries.
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 0.4% last week, with the UK FTSE All Share market up by 1.8% on the week. This came on the back of some strong earnings reports from UK companies and also an inflation number which came in lower-than-expected and on stronger-than-expected retail sales data. UK retail sales rose by the most in nearly 3 years and Natwest (which rose by over 7% on the week) reported its biggest annual profit since the 2007 financial crisis!
- UK retail sales data showed a 3.4% increase in the month of January. This was more than twice the 1.5% increase that had been penciled in by analysts and was the biggest increase that we’ve seen since April 2021. This, combined with the inflation data, gave stock markets the confidence that the UK recession would be short-lived and, in any case, this is already very much baked into the price of many UK assets. Figures published on Thursday (which got most attention last week) showed that the UK had fallen into a recession in the 4th quarter, with a -0.2% contraction in output. The UK inflation rate held steady at 4%. Whilst this wasn’t a decline, it was lower than the 4.1% that had been expected by analysts and was hence welcomed by the markets. There are some high inflation numbers which fall out of the UK series over the next few months, so we should see the rate fall fairly quickly (although we do expect it to remain choppy!).
- Japanese stocks continued their good run last week, with the market rising by 3.9%. This is excellent news for the Magnus portfolios as we are overweight to Japan. There was some good news from Japanese corporates and this, combined with some weak 4th quarter growth data, helped propel Japanese stocks higher. Japan still has very low (in fact slightly negative) interest rates, hence weak growth data was taken positively as it meant that the Bank of Japan would not be in a hurry to start raising interest rates and choke off growth in the stock market.
- Emerging market stocks also got a good boost last week, rising by 2.4%. The Pacific North of South Fund which is held in the Magnus portfolios is now up over 4% for the month after a slow start to the year (NB it was up c15% last year!). Emerging markets got a boost from some positive Chinese data which showed a healthy pick-up in spending over the Lunar New Year holiday: more than 61 million rail trips were made and hotel sales on Chinese e-commerce platforms increased by more than 60%, according to state media. China’s stock markets resume trading this week after having been shut for the new year.
- Bond markets sold off a touch last week as bond yields rose. The key driver for this was higher-than-expected inflation in the US. US inflation came in at 3.1% which was higher than the 1.9% figure that analysts had been expecting. This caused markets to delay the timing of the first cut to interest rates, with bond futures markets now pricing the first cut to US interest rates in June and to UK interest rates in August. This led bond yields to rise (which meant bond prices fell), with US Treasury bonds down about 0.6% on the week and UK gilts down about 0.1%.
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.
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