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Please see below article received from Brooks Macdonald this morning, which provides a market update with specific reference to the US and the UK.

What has happened

The US stock market experienced a notable rebound, with the S&P 500 climbing 1.25% and largely offsetting the previous day’s 1.61% drop. Despite a second consecutive day of losses for US regional banks, which saw a 2.28% decline, and ongoing concerns about New York Community Bancorp, the broader market appeared to recover.

Big tech earnings continue

After the market closed, tech giants Apple, Amazon, and Meta reported earnings that surpassed expectations. Meta’s shares soared approximately 15% after hours, buoyed by higher-than-anticipated revenue forecasts for the first quarter and the announcement of further share repurchases and its inaugural dividend. Amazon’s shares rose 7%, reflecting a robust profit forecast for the first quarter, despite its sales guidance falling slightly short of expectations. Apple’s shares, however, dipped nearly 3% after hours due to a significant sales decline in China, which overshadowed an otherwise modest earnings beat.

Bank of England

In the UK, the Bank of England maintained its interest rates, in line with market expectations. The Monetary Policy Committee (MPC) was divided, with the majority opting to keep rates steady, two members advocating for a 25 basis point hike, and one member favouring a 25 basis point reduction. Governor Bailey emphasized the need for more evidence of inflation trending towards the 2% target before considering rate cutes. Similar to the Federal Reserve, the MPC’s stance appeared to be gradually shifting towards the possibility of rate cuts, as indicated by the removal of the previous explicit tightening bias and the statement that the MPC is prepared to adjust policy as necessary. Market expectations for a rate cut by May decreased, but the likelihood of significant rate reductions by the end of 2024 remained high.

What does Brooks Macdonald think

Looking forward, the focus will be on the US jobs report for January, which will provide early data for 2024 and could influence the Federal Reserve’s rate cut decisions, with March’s outcome still uncertain despite recent comments from Fed Chair Powell. Recent macroeconomic indicators suggest the possibility of a ‘soft landing’ for the US economy. However, historical patterns remind us that the effects of a rate hike cycle can be delayed and unpredictable, often culminating in significant economic impacts.

Index 1 Day1 Week1 MonthYTD
MSCI AC World GBP 0.5%0.0%1.5%1.5%
MSCI UK GBP -0.1%1.3%-1.3%-1.3%
MSCI USA GBP 1.1%-0.1%3.0%3.0%
MSCI EMU GBP -0.4%0.7%0.2%0.2%
MSCI AC Asia Pacific ex Japan GBP -0.1%-1.3%-4.5%-4.5%
MSCI Japan GBP -1.0%0.6%4.0%4.0%
MSCI Emerging Markets GBP 0.5%-1.0%-3.9%-3.9%
Bloomberg Sterling Gilts GBP 0.5%1.9%-1.9%-1.9%
Bloomberg Sterling Corps GBP 0.3%1.6%-0.8%-0.8%
WTI Oil GBP -2.8%-4.9%3.2%3.2%
Dollar per Sterling 0.1%0.4%0.0%0.0%
Euro per Sterling -0.1%0.0%1.8%1.8%
MSCI PIMFA Income GBP 0.4%0.9%0.1%0.1%
MSCI PIMFA Balanced GBP 0.5%0.8%0.2%0.2%
MSCI PIMFA Growth GBP 0.6%0.7%0.7%0.7%
Index 1 Day1 Week1 MonthYTD
MSCI AC World USD 0.7%0.4%1.2%1.2%
MSCI UK USD 0.1%1.7%-1.5%-1.5%
MSCI USA USD 1.3%0.3%2.8%2.8%
MSCI EMU USD -0.2%1.1%0.0%0.0%
MSCI AC Asia Pacific ex Japan USD 0.1%-0.9%-4.7%-4.7%
MSCI Japan USD -0.8%0.9%3.8%3.8%
MSCI Emerging Markets USD 0.6%-0.6%-4.1%-4.1%
Bloomberg Sterling Gilts USD 0.1%1.7%-2.4%-2.4%
Bloomberg Sterling Corps USD -0.1%1.5%-1.3%-1.3%
WTI Oil USD -2.7%-4.6%3.0%3.0%
Dollar per Sterling 0.1%0.4%0.0%0.0%
Euro per Sterling -0.1%0.0%1.8%1.8%
MSCI PIMFA Income USD 0.6%1.3%-0.1%-0.1%
MSCI PIMFA Balanced USD 0.6%1.2%0.0%0.0%
MSCI PIMFA Growth USD 0.7%1.0%0.4%0.4%

Bloomberg as at 02/02/2024. TR denotes Net Total Return

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