Market Update – 17th April 2024.

It has been a choppy week for markets as investors have considered some pieces of key economic data and have kept an eye on tensions within the Middle East.

In the US, new data on Monday revealed that the economy finished Q1 on concrete footing. The Commerce Department published data that retail sales in the US for March were robust, illustrating a 0.7% rise month-over-month, with the most prominent increases being in non-store retailers and fuel stations. Excluding elements such as food, fuel and building materials, ‘core retail sales’ – as they are called – rose 1.1%. This data will be particularly interesting for the Fed who are already digesting other strong economic data for the month of March in the form of significant employment gains and a hotter than expected CPI reading as they battle to reduce inflation to their 2% target. Taken together with the latest commentary from Fed chair Jerome Powell yesterday, who stated that policymakers need to gain more confidence from cooling inflation data that is not yet there, signs are pointing to that the Fed may hold off on potential rate cuts that the market had priced in for this year.

Over in the UK, a report revealed that the unemployment rate within the region was the highest it’s been for 6 months coming in at 4.2% between December and February. Whilst latest figures suggest a loosening in the labour market, regular wages excluding bonuses grew by 6% in the three months to February compared with the same period a year earlier. One might wonder if this does not pose questions of whether the Bank of England is ready to cut interest rates. However, inflation data for the economy released today showed that while inflation is indeed heading in the right direction, the annual rate eased less than hoped for last month, from 3.4% to 3.2%, and this suggests that the decision to cut is far from foregone for policymakers who continue to push forward with a data dependent stance to get inflation down to their 2% target.

Despite Chinese retail sales and industrial production data coming in below expectations for March, GDP for Q1 was revealed to have grown at a pace unexpected by economists, coming in at 5.3% from a year ago. The figure marks a rise from growth of 5.2% in the previous quarter & suggests Chinese authorities may be sufficiently confident in the maintaining their current policy and stimulus efforts. Markets briefly came off at the news, believing that it means the People’s Bank of China will be less likely to intervene, when necessary, in the path of economic recovery going forward. In our view, however, we will likely see slow and steady stimulus continue in the region and will capitalise upon short term market noise in the interim.

Still to come we have Japan’s CPI data, UK retail sales and Chinese policymakers’ decision on their 1 year and 5 year prime loan rates.

Nicola Tune, Portfolio Specialist 

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