Weekly Market Wrap 29/01/24

Markets look ahead to key central meetings later this week, with both the Bank of England and the Federal Reserve set to announce their latest rate decisions. The European Central Bank made progress towards cutting rates, despite failing to deliver a surprise at last week’s meeting, whilst the case for lower rates in the US received a big boost.

UK Market  

The UK market ended the week higher. UK consumer confidence rose to its highest level in two years, with a reading of -19 in January, up from -22 in December. Falling inflation and speculation about interest rate cuts in the coming months appear to be aiding consumer sentiment. The Bank of England will announce its latest interest rate decision on Thursday, with markets fully expecting rates to be held at 5.25%. The first rate cut in the UK is currently expected to occur in May.

US Markets

The S&P 500 ended the week 1.06% higher, whilst the NASDAQ ended the week up 0.62%. Core personal consumption data, the Federal Reserve’s preferred measure of inflation was released last week, slowing by more than expected to 2.9% YoY, down from 3.2% in November. This reading is the first time the PCE has fallen below 3% since 2021 and comes ahead of the latest Fed interest rate decision coming on Wednesday. Markets fully expect rates to be held at current levels in the January meeting, with a 50% chance of a cut priced in for March.

European Markets 

The Euro Stoxx 50 ended the week 3.50% lower. The European Central Bank held rates steady in last week’s meeting as investors had expected, however ECB president Christine Lagarde made a number of dovish comments at the follow press conference. Lagarde told investors that price pressures were expected to ease over the course of 2024 and that a decline in wage growth was “directionally good”. Investors are currently forecasting an 80% chance of a rate cut in April. 

Commodities

Brent crude rallied by 6.35% ending the week at $83.55 per barrel as tensions in the Middle East continued to escalate after a drone attack on US forces added to concerns over potential supply disruption.  

Fixed Income

Yields on US 10-year bonds were flat at 4.15%, with mixed news released across the week. Investors had begun the week positively as releases of economic data supported the case for a soft landing in the US. However, yields rebounded higher towards the end of the week as concerns grew over the increasing amount of government debt.

The Week Ahead

Monday – No major events

Tuesday – European GDP

Wednesday – Fed Interest Rate Decision

Thursday – BoE Rate Decision, Eurozone Inflation

Friday – US Payrolls & Employment Data

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