Weekly Market Update and Featured Chart #12

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

The key takeaways:

• Job market heating up – As last week’s market update went to print, we got news from the US that Nonfarm payrolls blew past all expectations advancing by 303,000 in March.
• Stubborn US inflation – US inflation increased by 0.4% in March, the same as February. The annual rate increased to 3.5%, the second consecutive increase.
• Green shoots for Spring – The UK economy kept growing in February for the second month in a row, but at a slower pace. GDP increased by just 0.1%, compared to January's growth of 0.2% to 0.3%.
• Gold‘s breaking records – The price of Gold set another record high this week, breaching $2,400 an ounce for the first time ever. Likely due to investors trying to seek safe haven assets, amid geo-political and fiscal tensions.
• Holding firm – The European Central Bank maintained interest rates at record-high levels for a fifth consecutive meeting, leaving the main refinancing rate at a 22-year high of 4.5% and the deposit facility rate holding at an all-time record of 4%.

The rising economy and jobs market in the US continues to throw up challenges for the Fed. With the economy strong and prices staying high, it’s less likely that interest rates will go down. Europe and the UK might end up lowering rates before the US does, which could give a boost to their stock markets. It's a good idea to diversify investments across different regions, as central banks in different places may start to diverge their methods.

Chart of the week

The chart shows the concentration in the top ten stocks for each of the listed index.

Source: FTSE, Bloomberg, S&P Dow Jones, Rathbones, data as of 29 February 2024.

Whilst we hear a lot about the US having a highly concentrated stock market, when looking at the FTSE 100 and the All Share, the UK actually has greater concentration of risk than the US. However, in a multi asset portfolio, having a variety of sectors from the UK has the potential to lower risks – and investing in UK small cap stocks can spread the risks out even further.

Markets were once again rocked by the surprise US inflation print which saw bond yields spike upwards and caused markets to fall in both the UK and the US. Thankfully, the pain didn’t last for too long with the FTSE 100 and S&P 500 recovering the majority of the losses by the end of the week. In Europe, stocks rose on Thursday, the most in a month - as more are betting on lower interest rates in the euro-area, which would help industries that depend on borrowing.

Gold continues to surge upwards as tensions in the middle east increase, as well as Brent crude rising for similar reasons. Yields on both the US and UK 10-year bonds spiked higher on the week following the surprise inflation print which pushed back expectations for interest rate cuts.

In our latest Let’s Talk Markets podcast, Isaac Stell and Patrick Ingram talk sunny prospects for investors – listen now!

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.