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Weekly Market Wrap 22/01/24

The S&P 500 reached a new all-time high on Friday as AI optimism among investors pushed chipmakers and related stocks higher towards the end of the session. There was more disappointing news for the UK as inflation surprised to the upside, whilst markets look ahead to the latest European Central Bank rate decision. 

UK Market  

The UK market ended the week higher. UK inflation data came in higher than expected this week, both headline and core CPI unexpectedly rose with headline inflation rising to 4.0% (estimate 3.8%) and core inflation rising to 5.1% (estimate 4.9%). Retail Sales also unexpectedly fell by 2.4% when an increase of 1.1% was forecast. The sharp fall in sales will raise questions about The Bank of England’s persistent high rates and how consumers in the UK are dealing with increased costs of borrowing. Markets are pricing in the first BoE rate cut in June 2024.  

US Markets 

The S&P 500 ended the week 1.17% higher, reaching a new all-time high, whilst the NASDAQ ended the week up 2.86%. US retail sales data came in higher than expected last week, increasing by 0.6% in the month of December when a 0.4% rise was expected. The upside surprise reinforced the view that the US economy is still strong and is able to continue growing despite persistent high borrowing costs, casting doubt over when the Fed could start cutting rates. Initial jobless claims came in below forecasts (187k vs 207k), adding to the positive outlook for the US economy. Despite signs of economic strength, markets are still pricing in a rate cut for the Fed’s meeting in March of this year. 

European Markets  

The Euro Stoxx 50 ended the week 0.70% lower. European investors are eagerly looking ahead to the European Central Bank’s latest rate decision on Thursday, where rates are expected to be left unchanged, however markets will hope for clues on the ECB’s moves over the coming months. 

Fixed Income 

Yields on US 10-year bonds rose across the week to 4.14%, after continued strong economic data pushed back against investor hopes of imminent rate cuts.  


The Week Ahead 

Monday   no major events

Tuesday –  no major events

Wednesday – US Manufacturing & Services PMIs 

Thursday – ECB Rate Decision 

Friday – US Core Personal Expenditure  

*x% up/down to price as of last week’s close