Market Update – 21st July 2024.

31st July 2024

Eurozone GDP for the second quarter of 2024 has increased by 0.3% in comparison to the previous quarter and surpassed economists’ expectations of a 0.2% rise. Specifically, the highest increase from the previous quarter came from Ireland at 1.2%, while the highest decline was constructed by Hungary at -0.2%. Following a 2023 characterised by stagnation and even a technical recession in its final quarter, the latest figure indicates that the economy is returning to more sound footing. The release also comes ahead of the latest inflation figures for the region due out later today. While ECB President, Christine Lagarde, maintains that another rate cut in September is wide open, policymakers may want to see further evidence that price growth is continuously slowing before they consider further loosening policy – especially given that they expect inflation not to return to 2% until 2025.

Meanwhile, big tech earnings continue to roll in. After disappointing reports of profits from Alphabet and Tesla, Microsoft earnings have showed a steady quarter with revenue up by 15%, but their cloud sector growth came in under expectations. In the past two years, so-called Mag-7 stocks have held dominance in the market, but recent earnings data have reminded investors of the importance of diversification.

Following a two-day policy meeting, the Bank of Japan have raised their benchmark interest rate to ‘around 0.25%’. Previously, policymakers had held rates at or below zero for a number of years in order to shake off the persistently looming spectre of deflation. However, as wage growth also remained stagnant, consumers were reluctant to part with their yen and domestic demand dragged. Of late, a weak yen has shored up particularly imported elements of inflation, prompting the bank to make the latest policy move. Coupled with this, retail sales data for the region came in at 3.7% year on year in June, above predictions of a 3.3% gain.

And it seems the prospects of interest rate hikes have not dampened the Japanese people’s outlook on the economy. Consumer confidence for Japan came in this morning for the month of June at 36.7 in comparison to 36.4 – the most positive consumer sentiment since April.

Over in China, manufacturing PMI for the month of June came in at 49.4 in contrast to May’s 49.5, some way below expansionary territory. A breakdown showed that foreign sales, new orders and buying levels all declined, although the drop in employment reported had eased from last month. Outputs painted a more positive picture, expanding for a second month.

In Ireland, consumer confidence rose to 74.90 points in July from 70.50 points in June of 2024. This is the highest level in 2 and a half years.

Still to come this week we have the Eurozone’s inflation rate, the Bank of England’s interest rate decision, the Fed’s interest rate decision and US manufacturing data.

Nicola Tune, Portfolio Specialist