Market Update – 8th November 2023.

8th November 2023

In the absence of significant economic data and following a robust week, financial markets faced challenges in establishing a clear direction. Last week, big tech drove up a rally in their stocks, shoring up their strongest performance in two years and putting aside the Fed’s latest dovish comments on monetary policy. In the US, 10-year treasury yield has moderated this week, falling to 4.57% down from 5% last month. The first hour of Tuesday’s session saw a mixed bag of performance for the likes of the S&P 500, which ebbed and flowed before winning the day  for the seventh consecutive time.

Also this week, the IMF have suggested that China’s economy, having made sufficient progress post-COVID, will grow by 5.4% this year. We’ve been saying for some time now that traction is building within the region following a sluggish start to the year, and it looks like this may be coming to fruition. The growth forecast comes off the back of stronger than predicted growth in Q3 and has undoubtedly been spurred on by the copious amount of monetary stimulus the government has ploughed into the region over the past few months. In the coming weeks, we are also likely to see China-US tensions thawing further as President Xi Jinping visits the US for only the second time in three years to speak with President Biden on the 17 November. Each side is hoping to generate further political consensus amongst the other, with China in particular looking to soften the current restrictions the US has put in place on technological exports to their region.

In the UK, a report on retail sales showed activity rose 2.6% on a like-for-like basis in October 2023 from a year ago, slowing from a 2.8% gain the previous month.  Whilst the data was above expectations higher costs continue to weigh on consumers however, the Bank of England’s pause on interest rates last week should offer consumers and business some respite.

Finally, a European Central Bank (ECB) survey revealed on Wednesday that consumers have changed their inflation forecast for the next 12 months, believing the figure will stand at 4%. Household inflation predictions are, of course, not a reliable indicator for the headline reading that we typically report upon. However, they can illustrate the direction of spending and saving habits, and so might pose a challenge for ECB policymakers as they try to keep price growth moderate.

Still to come this week we have Fed meeting minutes, US jobless data, as well as UK industrial and Manufacturing production data and UK GDP.

Nicola Tune, Portfolio Specialist