Please see below Daily Investment Bulletin received from Brooks Macdonald this morning, which provides a global market update as we enter the festive season.
What has happened
European equities rose yesterday, reflecting some of the large surge in US indices seen after the European close on Wednesday. US equities meanwhile trod water with banks declining due to a further fall in bond yields and US interest rate expectations. With yields falling and economic growth fears rising, growth equities continued their outperformance yesterday with large cap technology shares rising despite the slight fall in the headline US index.
Economic data
There was little good news within the ISM manufacturing data yesterday which fell into contractionary territory for the first time since May 2020. Both new orders and the employment measure also contracted. The release has added to market concerns over the risk of recession in 2023 and mirrors some of the negativity seen in other data releases in recent weeks. With the Fed, after Powell’s speech, now viewed as more aware of the economic risks in 2023 and beyond, bad economic news is no longer necessarily good news for markets. In a sign that a bit of normality has returned, yields fell on the back of this poorer data as bond markets priced in a loosening of Fed policy in future years. The terminal rate is now only expected to reach 4.86% in the US, a major downgrade from last week’s figure.
US employment report
Today sees the latest release of the US non-farm payroll figures which the market expects to come in at 200,000 new jobs created in November compared to 261,000 created in October. Whilst the overall unemployment rate is expected to hold steady at 3.7%, 200,000 new jobs would be the weakest reading in two years. With markets already concerned about economic growth momentum, a weak employment report would likely catalyse further fears of a cyclical slowdown.
What does Brooks Macdonald think
More positively, reduced economic momentum does appear to be filtering through to the inflation numbers, however. The PCE inflation number, which is the Fed’s preferred gauge, came in below expectations at both a headline and a core level. The question for markets now is how quickly the inflation numbers can fall and therefore allow the Fed and other central banks to react to the recessionary risks in 2023.
| Index | 1 Day | 1 Week | 1 Month | YTD | ||||||||||||||||||
| TR | TR | TR | TR | |||||||||||||||||||
| MSCI AC World GBP | -1.9% | 0.4% | 1.5% | -5.5% | ||||||||||||||||||
| MSCI UK GBP | -0.2% | 1.2% | 5.5% | 8.3% | ||||||||||||||||||
| MSCI USA GBP | -2.6% | 0.2% | -0.9% | -6.0% | ||||||||||||||||||
| MSCI EMU GBP | -0.1% | 0.4% | 7.9% | -6.9% | ||||||||||||||||||
| MSCI AC Asia ex Japan GBP | -1.5% | 3.4% | 9.6% | -10.1% | ||||||||||||||||||
| MSCI Japan GBP | 0.1% | -0.9% | 4.7% | -5.6% | ||||||||||||||||||
| MSCI Emerging Markets GBP | -2.0% | 2.3% | 5.8% | -10.0% | ||||||||||||||||||
| Bloomberg Sterling Gilts GBP | 0.4% | -1.3% | 2.6% | -21.4% | ||||||||||||||||||
| Bloomberg Sterling Corps GBP | 0.5% | -0.6% | 4.0% | -17.5% | ||||||||||||||||||
| WTI Oil GBP | -1.8% | 2.3% | -13.9% | 19.2% | ||||||||||||||||||
| Dollar per Sterling | 1.6% | 1.1% | 6.6% | -9.5% | ||||||||||||||||||
| Euro per Sterling | 0.5% | 0.1% | 0.1% | -2.1% | ||||||||||||||||||
| MSCI PIMFA Income | -0.7% | 0.0% | 2.2% | -6.6% | ||||||||||||||||||
| MSCI PIMFA Balanced | -0.9% | 0.1% | 2.4% | -6.0% | ||||||||||||||||||
| MSCI PIMFA Growth | -1.2% | 0.3% | 2.2% | -4.1% | ||||||||||||||||||
| Index | 1 Day | 1 Week | 1 Month | YTD | ||||||||||||||||||
| TR | TR | TR | TR | |||||||||||||||||||
| MSCI AC World USD | 0.7% | 1.6% | 8.3% | -14.4% | ||||||||||||||||||
| MSCI UK USD | 2.5% | 2.3% | 12.6% | -1.9% | ||||||||||||||||||
| MSCI USA USD | 0.0% | 1.3% | 5.7% | -14.8% | ||||||||||||||||||
| MSCI EMU USD | 2.6% | 1.5% | 15.2% | -15.6% | ||||||||||||||||||
| MSCI AC Asia ex Japan USD | 1.1% | 4.6% | 16.9% | -18.6% | ||||||||||||||||||
| MSCI Japan USD | 2.8% | 0.2% | 11.7% | -14.5% | ||||||||||||||||||
| MSCI Emerging Markets USD | 0.6% | 3.5% | 13.0% | -18.4% | ||||||||||||||||||
| Bloomberg Sterling Gilts USD | 3.4% | -0.3% | 9.8% | -28.8% | ||||||||||||||||||
| Bloomberg Sterling Corps USD | 3.5% | 0.5% | 11.3% | -25.3% | ||||||||||||||||||
| WTI Oil USD | 0.8% | 4.2% | -8.1% | 8.0% | ||||||||||||||||||
| Dollar per Sterling | 1.6% | 1.1% | 6.6% | -9.5% | ||||||||||||||||||
| Euro per Sterling | 0.5% | 0.1% | 0.1% | -2.1% | ||||||||||||||||||
| MSCI PIMFA Income USD | 1.9% | 1.1% | 9.1% | -15.4% | ||||||||||||||||||
| MSCI PIMFA Balanced USD | 1.7% | 1.3% | 9.3% | -14.9% | ||||||||||||||||||
| MSCI PIMFA Growth USD | 1.4% | 1.4% | 9.1% | -13.1% | ||||||||||||||||||
| Bloomberg as at 02/12/2022. TR denotes Net Total Return | ||||||||||||||||||||||
Please check in again with us soon for further relevant content and news.
Chloe
02/12/2022