Weekly Market Update and Featured Chart #10

This week’s market update highlights the latest economic news and general market performance across the UK, US and Asia.

Here’s the key takeaways:

• It’s official – data released this week shows the UK economy shrank by 0.3% in Q4 of 2023, reaffirming that the UK slipped into a technical recession at the end of last year.

• Holding firm – despite news of the UK’s technical recession, Bank of England (BoE) policy maker Catherine Mann stated that markets are pricing in too many rate cuts this year and the BoE are unlikely to cut rates before the Fed. 

• Feeling upbeat – in the Euro area, the economic sentiment indicator increased to a three-month high of 96.3 in March. Both manufacturing and consumer confidence have surged with the latter hitting its highest level since February 2022.

• Bad news for chocolate lovers – cocoa prices rose above $10,000 a metric ton on Tuesday, as crop disease, extreme weather and the re-purposing of land left a huge shortfall in supply. 

• Japan’s sliding currency – the Yen slipped to its lowest level vs dollar in 34 years, despite the ending of negative interest rates. With no clarity on further policy tightening, and the central bank’s assurance of continued easy monetary policy, the Yen has been pushed in the wrong direction.  

What does that mean for me and my clients?

Markets have been optimistic in Q1, after pricing in lower interest rates. However, the market isn’t the economy, and the risk of the market wrongly pricing macro news remains high. Policy makers are saying the market’s got ahead of itself, and cuts won’t be as forthcoming as expected. This means we’re on uncertain ground. After a strong start to the year, investors should be aware of the risks to the downside if cuts don’t come. 

Chart of the week

China population growth (1950-2023)

Source: National Bureau of China 

The chart above shows Chinese population growth from the 1950’s to 2023. 

Why’s this worth sharing?

China's population fell by 2.08 million in 2023, following a 0.85 million drop in 2022 which was the first population decline since 1961. Could this cast a shadow over Beijing's ability to grow its economy as it succumbs to similar ageing trends afflicting developed nations like Japan?

The UK and US delivered another robust week of returns, with the week’s rally leaving the FTSE 100 up 4.5% in March and up 3.1% for the quarter - the strongest gains since late 2022. In the US, the S&P 500 hit another record high, despite the European commission launching an investigation into Apple, Alphabet and Meta under the bloc’s Digital Markets Act.

Japanese stocks paused for breath as the reverberations around the Bank of Japan’s latest policy announcements are understood, and the prospect of support for its weakening currency.

Oil is slightly higher on the week, despite an increase in US stockpiles. The prevailing view is that OPEC+ will maintain its cuts of around 2 million barrels a day. 

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.