Weekly Market Update and Featured Chart #17

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

The key takeaways:

• UK unemployment rises – the unemployment rate rose to 4.3% between January and March, up from 4.2% in Q4 2023. This was driven largely by those unemployed for less than 6 months.
• US inflation eases - US annual inflation rate fell to 3.4% in April, down from March’s 3.5%, as food and shelter increases slowed down.
• Euro-zone still heading for a soft landing – new European Commission forecasts predict GDP to grow 0.8% in 2024 while inflation fell-back faster than expected.
• Japanese economy shrinks – GDP fell 0.5% in Q1, a larger contraction than the 0.4% fall forecasted, due to stronger inflation numbers and the impact of an earthquake at the beginning of the year.
• Anglo American pressure – FTSE 100 miner Anglo American rejected an improved £34bn takeover offer from BHP as it looks to sell off its platinum and De Beers diamond units to become leaner and fend off future bids.

This week's inflation and unemployment data from the UK and US matched market expectations, while indicating that the economies are slowly cooling. The Bank of England is still expected to cut rates as early as June, while the Fed view remains more cautious. This is good news for many investors, but there's still a risk that inflation could be more persistent than expected, which could reverse gains in assets sensitive to interest rates.

Chart of the week

Source: First Trust, S&P Capital IQ. Data as of 3/28/24. There is no assurance any forecasts will be achieved.

The chart shows the forecasted Earnings Per Share (EPS) growth changing over time for the S&P500, split into the ‘Magnificent-7’ and remaining 493 stocks in the index.

Despite the dominance of the Magnificant-7 tech stocks through much of 2023, the graph shows the quarterly earnings growth in these highly rated companies are expected to slow. As earnings growth picks up for the remaining 493 stocks, it suggests a healthier and more inclusive market, leading to broader gains in 2024. This trend should help many active managers who underweight the Mag-7 stocks to reduce risk and maintain more diversified portfolios.

The FTSE 100 finished the week flat to Thursday, while Friday will give it a chance to end in positive territory for a fourth straight week. The FTSE 250 saw gains due to better economic conditions and the likelihood of an upcoming rate cut.

Similarly in the US, markets rose as CPI cooled and retail sales fell, which supports a potential rate-cut.

In Asia, the Hang Seng increased, driven by tech stocks like Tencent and expected government support for the property sector. 

Brent crude was flat thanks to offsetting factors from lower US stockpiles, a weaker outlook for demand and a fading geopolitical risk premium. Gold rose and yields on both the US and UK 10-year bonds fells on optimism around rate cuts.

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.