News

Please see below article received from Brooks Macdonald yesterday afternoon, which provides a global market and economic update.

• China continues to be a global inflation outlier, with consumer price pressures absent, while producer prices fall further into outright deflation
• Central banks from US, Europe and Japan decide on interest rates this week, hot on the heels of surprise hikes from Australia and Canada last week
• US consumer price inflation in focus this week, and while inflation rates are expected to fall, core prices are still being judged as relatively stickier
• The flipside of sticky inflation, economic growth is proving more resilient, as UK Confederation of British Industry (CBI) last week upgrades its economic outlook for this year and next

What happened last week and what are the highlights ahead for markets this week

Global equities arguably had a better week last week than bonds, thanks to continued resilience of large cap US technology stocks in particular. For bond markets meanwhile, surprise hikes from central banks in Australia and Canada spooked bond investors, as they worried about the read-across for the US Federal Reserve (Fed) who meet later this week. Yields on US 10-year Treasuries were up +4.9 basis points (bps) on the week (including +2.1bps on Friday), finishing the week at 3.74%. Looking to the week ahead, we have central bank interest rate policy decisions, in calendar order from the Fed (Wednesday), the European Central bank (ECB, Thursday), and the Bank of Japan (BoJ, Friday). For the Fed, ahead of the meeting, we also get the latest May monthly reading of US CPI (Consumer Price Index) inflation on Tuesday. Rate hikes this week are thought to be most likely to come from the ECB, with the Fed expected to ‘skip’ a hike until July, while the BoJ is expected to continue to stay unchanged. In economic data due elsewhere, US Retail Sales are due Thursday and before that UK monthly GDP (Gross Domestic Product) for April is due Wednesday – expectations are for a month-on-month gain of 0.2%.

China continues to be a big global inflation outlier

Against the sticky and still-high inflation ‘run-of-play’ that we are seeing in most developed economies globally at the moment, economic data out from China on Friday gave markets an important reminder that the world’s second-biggest economy has a very different message: China continues to be a global inflation outlier. China’s latest CPI print for May edged up only slightly to 0.2% year-on-year (versus 0.1% year-on-year in April), while PPI (Producer Price Index) deflation looked entrenched, plunging -4.6% year-on-year. On PPI specifically, it was the eighth straight month of producer deflation and the steepest fall since February 2016. All in all, with inflation currently absent in China, that leaves its central bank with lots of room for manoeuvre to support its economy over the reminder of this year, should it be needed.

Central banks from US, Europe and Japan decide on interest rates this week, hot on the heels of surprise hikes from Australia and Canada

Last week’s central bank meetings from the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) are an important lead into this week in terms of how their actions has shaped expectations. Both the RBA and the BoC had been expected to leave their rates unchanged, but in the event, both hiked by 25bps. The BoC was particularly noteworthy – after its previous last hike in January, the Canadian central bank had signalled a pause, keeping rates on hold at their March and April meetings. That willingness to sit back however disappeared last week, and Canadian interest rates, at 4.75%, are now at 22-year highs. Driving the increased hawkishness has been inflation stickiness, a theme common to many central banks recently – in Canada’s case, annual CPI inflation rose to 4.4% in April, the first increase in 10 months.

The most important central bank of them all? US Federal Reserve meets

The focal point this week is the Fed rate announcement due Wednesday. For this week, Fed Funds futures are currently pricing in a circa 30% probability of a June hike of 25bps. By contrast, it seems the Fed might yet ‘skip’ a hike in June, only to post a rate-hike at their following meeting in late-July, where the probability of a hike rises to circa 55%. Also, important to look at this week with the Fed’s statement will be their latest Summary of Economic Projections, including their so-called ‘dot-plot’ of interest rate expectations. Feeding into the Fed’s rate decision will be the US CPI print due tomorrow. While the CPI ‘all-times’ annual rate is expected to drop to 4.1% in May (from 4.9% in April), much of that drop comes from the tougher comparative last year when energy and food prices were soaring. For the core CPI print (excluding energy and food prices), this is expected to be running higher at 5.3% but still down on April’s 5.5%.

The flipside of sticky inflation, economic growth is proving more resilient

For most western economies, inflation continues to be above target, especially in the case of core prices. Driving this inflation stickiness however, the flipside is that GDP data for some economies is proving to be somewhat more resilient than had been feared at the start of this year. Take the UK for example – estimates out last Friday from the UK CBI point to +0.4% GDP growth this year (up from a contraction of 0.4% previously), followed by +1.8% in 2024 (versus +1.6% previously). As the CBI noted in its press release “the [UK] economy looks to have fared better than expected in first half of 2023, and is set to steer clear of a recession … tailwinds to growth have strengthened since our previous forecast in December 2022: the global outlook has improved”.

Please check in again with us soon for further relevant content and market news.

Chloe

13/06/2023

Please see the below article from AJ Bell received this afternoon giving a market update for today (Friday 2^nd June 2023):

Market attention on Friday turned to the US employment report and, further out, the next interest rate decision by the Federal Reserve, after legislators passed a bill that will prevent the US government from defaulting on its debts.

Stocks were higher ahead of the May nonfarm payrolls report, due out at 13:30 BST.

The FTSE 100 index was up 74.26 points, 1.0%, at 7,564.53 at midday in London. The FTSE 250 was up 225.09 points, 1.2%, at 19,052.85, and the AIM All-Share was up 5.05 points, 0.6%, at 789.50.

The Cboe UK 100 was up 0.8% at 754.70, the Cboe UK 250 was up 1.3% at 16,610.82, and the Cboe Small Companies was up 0.4% at 13,632.09.

The US Senate voted to suspend the federal debt limit, capping weeks of fraught negotiations to eliminate the threat of a disastrous credit default just four days ahead of the deadline set by the Treasury.

Economists had warned the US government could run out of money to pay its bills by Monday. This left almost no room for delays in enacting the Fiscal Responsibility Act, which extends the government’s borrowing authority through 2024 while trimming federal spending.

Hammered out between Democratic President Joe Biden and the opposition Republicans, the measure passed the Senate with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives.

‘Risk sentiment has improved markedly with the passage of the US debt ceiling deal through Congress,’ said Fawad Razaqzada, market analyst at City Index and Forex.com

As US President Joe Biden prepares to sign the legislation into law, attention now turns to the key US nonfarm payrolls report for May. It is expected to show an increase in jobs of 195,000, up from 253,000 in April.

‘US jobs numbers this afternoon may provide some pointers to the next move by the Federal Reserve, whose decision making no longer needs to consider the potential financial stability risks associated with default on US debt,’ said AJ Bell investment director Russ Mould.

‘If the non-farm payrolls data indicates continued tightness in the labour market, the Fed may feel it has to continue with rate rises when it meets on 14 June.’

Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker both made the case on Wednesday for a pause in interest rates hikes at the next meeting on June 13 and 14.

Stocks in New York look to continue their rally on Friday. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite all were called up 0.5%. On Thursday they ended up 0.5%, 1.0%, and 1.3%, respectively.

The dollar was mostly lower midday Friday in Europe.

The pound was quoted at $1.2530 at midday on Friday in London, up slightly compared to $1.2523 at the equities close on Thursday. The euro stood at $1.0770, higher against $1.0737. Against the yen, the dollar was trading at JP¥138.88, unchanged from Thursday.

Despite its softness ahead of the US jobs report, the dollar is set to rise further, Brown Brothers Harriman thinks.

‘Banking sector concerns and dovish market pricing for Fed policy had been major negative headwinds on the dollar in recent months, but those have finally begun to clear,’ BBH said. ‘Now, we believe passage of the debt ceiling deal removes the final headwind for the dollar, and so we see this recent rally continuing.’

Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.

Andrew Lloyd DipPFS

02/06/2023

Please see below ‘Markets in a Minute’ article received from Brewin Dolphin yesterday evening, which provides a global market and economic update.

Most major markets finished in the red in a week that saw worse-than-expected economic data from the UK and Germany.

In Europe, the FTSE 100 lost 1.9% as UK inflation rose by a higher-than-expected 8.7%. Pan-European Stoxx 600 lost 1.6% as the German economy contracted 0.3%, taking it into recession.

Over in the US, the S&P 500 rose 0.3% and the Nasdaq added 2.0% as hopes were raised of an agreement on the debt ceiling and optimism over artificial intelligence boosted chip stocks. Meanwhile, the Dow lost 0.6%.

Asia saw all markets decline due to concerns of the US debt ceiling despite a boost in tech stock.

Food inflation falls in May

The FTSE 100 dropped 1.38% on Tuesday (30 May), as UK shop price inflation rose to an annualised 9% in May, up from 8.8% in April, the highest rate in 18 years, according to the British Retail Consortium (BRC).

The BRC announced Tuesday that annualised food inflation fell to 15.4% in May, declining from 15.7% in March. The decline is driven primarily by a fall in energy and commodities costs.

UK inflation remains persistently high

Figures from the Office of National Statistics released last week showed that the UK Consumer Price Index (CPI) rose by an annualised 8.7% in April, down from 10.1% in March and higher than a predicted 8.4%. Falling energy and gas prices contributed to the decline but remain a main driver of inflation alongside food and non-alcoholic beverages. On a monthly basis, CPI rose by 1.2% in April compared to 2.5% in April 2022.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.8% in the year to April, up from 6.2% in March, the highest level in over 30 years.

The higher-than-expected inflation figures have led to a sharp decline in bonds, as investors expect the Bank of England (BoE) to raise interest rates further this year. The yield on two-year gilts rose to 4.4% on Wednesday last week, up from 3.7% earlier in the month. Yields rise when bond prices fall.

UK mortgage costs rose by up to 0.45 percentage points at the end of last week, with rates on fixed-rate deals now reaching 5.0% and over. The average two-year and five-year fixed-rate deals are now 5.63% and 4.80% respectively, according to USwitch.

Mortgage lenders have pulled nearly 800 residential and buy-to-let mortgage products from the UK markets in the anticipation of further interest rate hikes, figures from Moneyfacts show. Residential mortgages have fallen by almost 7% in a week, while buy-to-let products have dropped by more than 14%.

Chancellor Jeremy Hunt said on Friday that he was comfortable with the UK entering a recession if this would help bring down inflation, and that he would support the BoE raising interest rates, even as high as 5.5%, to stifle price growth.

UK retail sales volumes rise

British shoppers increased their spending last month as UK retail sales volumes grew by 0.5% in April, rebounding from a fall of 1.2% in March.

The non-food stores sector was boosted by strong performance in the other non-food stores sector, which saw 2.1% monthly growth thanks to strong sales of watches and jewellery and sports equipment. Clothing store sales volumes grew by 0.2%, while household goods fell by 0.2%.

Food store sales rose by 0.7% following a fall of 0.8% in March. Automotive fuel sales volumes fell by 2.2% in April following a 0.1% rise in March.

On a quarterly basis, sales volumes rose 0.8% in the three months to April compared to the previous three months, the highest rate since August 2021.

US debt ceiling agreement reached

US president Joe Biden and House of Representatives speaker Kevin McCarthy have agreed to suspend the US debt ceiling into 2025. The deal would see non-defence spending remaining roughly flat in 2024 before increasing by 1.0% in 2025. Defence spending would increase to $886bn, in line with president Biden’s previously proposed defence budget. The White House estimates that government spending would be reduced by at least $1tn, but no official calculations have been released yet. Most of these savings would come from capping spending on domestic programmes for housing, border control, scientific research and other discretionary spending.

The deal will need to be approved in the House of Representatives and the Senate before 5 June, when the US could default. While some lawmakers are expecting the deal to go through, several Republicans have publicly stated they will vote against it.

The deal has faced bi-partisan criticism; Republicans have argued it does not go far enough to reduce spending or target Biden’s student loan forgiveness plan, while Democrats have targeted the inclusion of work requirements for federal assistance.

Germany enters recession

Germany has entered a recession as the economy contracted 0.3% between January and March, according to government figures. The figures follow a 0.5% contraction in the final quarter of last year. A recession occurs when a country’s economy shrinks for two consecutive quarters.

Germany’s annualised inflation rate hit 7.2% in April, exceeding the eurozone average rate of 7.0%.

An increase in private sector investment and construction at the start of the year was offset by a decline in consumer spending. Household spending fell by 1.2% in the first quarter, as consumers reduced spending on food and beverages, clothing and footwear, and furnishings. Government spending also decreased by 4.9% compared to the previous quarter.

Please check in with us again soon for further relevant content and news.

Chloe

01/06/2023

Please see below article received from Brooks Macdonald yesterday afternoon, which provides a succinct but detailed global market update.

• Equities rose last week despite the risks of the US defaulting on its debt obligations
• President Biden and Republican Speaker McCarthy are set to meet at the White House to continue negotiations
• This week sees the release of the US Federal Reserve’s (Fed) preferred inflation measure as well as the UK’s inflation numbers

Equities rose last week despite the risks of the US defaulting on its debt obligations

Equity markets rose last week as investors shrugged off the impending US debt ceiling deadline, focusing on a constructive earnings season and the likelihood that the US has already reached its peak interest rate for this economic cycle.

President Biden and Republican Speaker McCarthy are set to meet at the White House to continue negotiations

Despite the fact there is still no final deal, and Republican negotiators walked out of talks on Friday, last week saw growing optimism that the US political leadership would find a compromise arrangement to avoid defaulting on US obligations. This helped equity markets to rise after trading in a tight range over the last month given concerns around the US debt ceiling and US regional banks. President Biden and House Speaker McCarthy are set to continue debt ceiling talks at the White House later today. Over the weekend there was a phone call which pointed to a more constructive tone than one would have imagined from the walkout on Friday. With Treasury Secretary Yellen warning that the chances were ‘quite low’ that the US could meet its obligations from mid-June, the stakes are high even if the mood music appears more favourable.

This week sees the release of the Federal Reserve’s preferred inflation measure as well as the UK’s inflation numbers

This week will see the release of the Personal Consumption Expenditure (PCE) inflation data series in the United States. This is the Fed’s preferred inflation measure and will be a major consideration when the Fed meets to determine the US interest rate in June. The University of Michigan will also release its final survey readings on Friday which include the medium-term consumer inflation expectations. The preliminary readings showed that consumer expectations for 5-10 year inflation had risen significantly (2.9% to 3.2%) which if confirmed in the final reading would be a concern to the Fed that is trying to keep expectations closely anchored to its 2% target. The latest UK inflation numbers will come on Wednesday with the market expecting a sharp fall from last month’s 10.1% year-on-year rise to 8.2%. Core inflation is expected to remain quite sticky however, falling from 6.2% to 6% year-on-year.

Despite US, and global, inflation remaining higher than policy makers would have hoped, the market still considers a pause in US interest rates as the most likely outcome. On Friday Fed Chair Powell said that ‘we can afford to look at the data and the evolving outlook to make careful assessments’, indicating that the Fed is in no rush to raise rates given that there is a lag between their previous hikes and the impact on the economy.

Please check in again with us shortly for further relevant content and news.

Chloe

23/05/2023

Please see below article received from Brewin Dolphin yesterday evening, which discusses why inflation remains high, whether a US recession is imminent, and the longer-term outlook.

Why is inflation still high after multiple rate hikes?

Interest rate changes can take a long time to materially affect inflation. Part of the reason is that many loans have fixed terms, where the interest payment does not immediately reflect changes in the central bank policy rate. Rate hikes have started to make an impact, but it will take time for the full effect to be felt.

The extent to which rate hikes influence different inflation categories varies. Central banks exercise a lot of control over house price and rental inflation, as this is a very interest rate-sensitive sector. Rate hikes have already depressed real-world rental inflation, but this takes time to impact consumers as it depends upon when rental agreements are renewed.

Wage inflation tends to be the most important determinant of services inflation excluding housing. The eventual drop in consumer and business spending from rate hikes leads to weaker demand for workers, which then depresses wages. In this sense, rate hikes have a big impact on services ex-housing inflation, but there can be long lags. At present, labour markets in many countries are very tight. For example, in the US there are currently 1.6 job openings for every unemployed worker. This tightness is keeping services ex-housing inflation running strong, notwithstanding the building headwind from higher rates.

Rate rises tend to have a weaker impact on tradeable goods inflation. Food inflation has dropped sharply in recent months in the US, but it remains strong in the UK and other European countries. The Russian invasion of Ukraine, regional weather and its impact on harvests, and foreign exchange movements explain much of the relative divergence in food price inflation in the US and Europe.

When will mortgage holders feel the impact?

It goes without saying that those who are on variable[1]rate mortgages are already feeling the impact of higher mortgage rates. But most households in the US and UK are on fixed-rate deals. Some households on fixed-rate mortgages have already begun to marginally reduce their spending in anticipation of their deals coming up for renewal at higher rates. In its May monetary policy report, the Bank of England (BoE) estimated that higher mortgage rates reduced UK aggregate household consumption by 0.3% in the first quarter of the year. This reduction in spending is being driven by mortgage holders on variable rates as well as those on fixed rates that have already reset.

We would expect that the majority of the reduction in spending will occur when fixed-rate deals actually renew. Roughly 85% of residential mortgages in the UK are fixed, but with terms for the most part at five years or less. The BoE estimates that higher mortgage rates will reduce aggregate household consumption by almost 0.5% by the fourth quarter of 2024. Notably, mortgage terms in the US are generally fixed for a much longer period, often to 30 years.

Another potential impact of higher mortgage rates is an increase in homeowners defaulting on their loans. The extent to which defaults occur will be linked not just to how high mortgage rates go (and for how long they stay there), but also by how the economy evolves. It is safe to say that if unemployment rises substantially, mortgage defaults will increase.

Have rate hikes been more effective in the US?

Several forces have brought inflation down faster in the US than in other regions. For one, the Federal Reserve (Fed) has been more aggressive in its monetary tightening efforts compared to most other central banks. The Fed has so far raised rates by five percentage points. This is above the 4.4 percentage points of hikes implemented by the BoE and 3.75 percentage points of hikes by the European Central Bank.

Meanwhile, until last autumn, the US dollar was strong, which depressed traded goods inflation. Weak European currencies relative to the dollar had the opposite effect. In addition, the inflation stemming from Russia’s war in Ukraine has had more of an impact on Europe. Wage-driven inflation has been a factor on both sides of the Atlantic, as demand for workers has been strong. But the UK has struggled more than most countries with labour supply, with Brexit likely a contributing factor.

What is the relationship between rate hikes and recessions?

Of the 13 Federal Reserve rate hike cycles since the mid-1950s, ten have been followed by a recession that began within a year-and-a-half of the last rate hike of the cycle. While this is clearly a high hit rate, it’s important to note that tightening cycles don’t happen in isolation and are not always the main driver of a recession.

Of the four US recessions that have occurred since 1990, the Fed certainly played a role, but the rate hikes were arguably not the primary cause of any of them. In two of these cycles, a shock rather than rate hikes was the primary cause of the recession. This was the case in 1990, when the economy only went into recession after the oil price spike due to the Gulf War. It was also the case in early 2020, when the recession was all about the Covid shock and had little to do with the Fed’s rate hikes of 2018.

In the other two cycles, the recessions were driven more by the unwinding of large excesses. In 2001, the recession was much more about the contraction in technology-related investment spending than it was about Fed rate hikes. Consumer spending (which represents about 70% of the economy) didn’t decline at all in that recession. In 2008/09, Fed rate hikes certainly acted as a catalyst (as was the case in 2001), but the recession was more about the unwinding of the excesses in banking and housing following a period of very lax lending standards. The main point is that the relationship between rate rises and recessions is not straightforward.

We believe it is more likely than not that the US suffers a recession, with a start date at the end of this year or perhaps in early 2024. But our conviction in this forecast is not high as there are pathways to a ‘soft landing’ (a slowdown in economic growth that avoids a recession). Europe and the UK may avoid an outright recession, but we expect growth to be sluggish. If a US recession does occur, it will likely be mild. A mild recession would limit increases in both the unemployment rate and mortgage defaults. It is also worth highlighting the supply/demand backdrop for housing, which is tight. House prices will suffer as this BoE rate cycle goes on, and to the extent that unemployment rises. But because there is so little supply, that should help to limit the declines. Similar supply and demand dynamics exist to support UK house prices in the face of higher mortgages rates.

What has happened historically after periods of low interest rates?

Central banks hiked rates rapidly in several periods during the 1970s and 1980s, but rates were not low heading into these cycles. Rates were low for a long time following the global financial crisis of 2008, but the subsequent rate hike cycles (2015-18 for the Fed and 2017-18 for the BoE) were very modest. There’s no good historical precedent for the current environment.

Mark Twain’s quote, “History does not repeat itself, but it often rhymes”, is often used to compare economic cycles. As highlighted above, some cycles involve shocks. Other cycles involve the build-up and subsequent unwind of excesses and imbalances. Some cycles see both occur. This cycle has its own similarities and differences with those of the past.

Please check in again with us soon for further relevant content and news.

Chloe

19/05/2023

Please see below ‘Markets in a Minute’ article received from Brewin Dolphin yesterday evening, which provides an update on global markets.

Stock markets were mixed last week as the US Federal Reserve and European Central Bank (ECB) hiked interest rates.

The S&P 500 rallied on Friday after the US nonfarm payrolls report beat forecasts. Despite this, the index ended the week down 0.8%, following comments from Fed chair Jerome Powell that interest rate cuts might not happen as soon as investors had hoped.

The pan-European Stoxx 600 declined 0.3% after ECB president Christine Lagarde said interest rates would rise to “sufficiently restrictive levels” until inflation eased to the bank’s 2% target. The UK’s FTSE 100 fell 1.2% ahead of the Bank of England’s (BoE) interest rate decision on 11 May.

Japan’s Nikkei 225 added 1.0% during the first two days of the week following a sell-off in the yen. The index was closed for the remainder of the week for national holidays. China’s Shanghai Composite ended its holidayshortened trading week up 0.3%, despite the official manufacturing purchasing managers’ index falling into contraction territory for the first time since December.

Stocks slip ahead of US inflation data

Stock markets fell on Tuesday (9 May) as investors looked ahead to the release of US inflation numbers on Wednesday. The consumer price index will be closely monitored for any insights into the Federal Reserve’s next monetary policy decision.

The BoE is expected to hike interest rates for the 12th time in a row on Thursday, with economists and markets anticipating a quarter of a percentage point increase to 4.5%. It comes after official data showed the rate of inflation stood at 10.1% in March, far higher than expected.

US nonfarm payrolls beat forecasts

Last Friday saw the release of the closely watched US nonfarm payrolls report, which showed surprisingly strong jobs growth in April. Some 253,000 new jobs were added during the month, higher than the 180,000 forecast by economists and the 165,000 job gains recorded in March.

The report from the Department of Labor also showed average hourly earnings increased by 0.5% month-onmonth, the highest rate since the middle of last year. Meanwhile, the unemployment rate fell back to a 53-year low of 3.4% from 3.5% the previous month.

Separate data showed the number of job openings shrank for a third consecutive month in March. However, there are still 1.6 job openings for every unemployed person, which suggests the labour market remains tight.

Fed hikes rates as expected

Earlier in the week, the Federal Reserve hiked interest rates by a quarter of a percentage point, taking the benchmark fed funds rate to between 5.0% and 5.25%. The statement from the Federal Open Market Committee omitted language saying that further policy firming may be appropriate. Instead, it said officials would take into account how the impact of monetary policy was accumulating in the economy.

At a press conference later in the day, however, Powell indicated that it was too soon to say with certainty that the rate-hiking cycle is over. Powell said the Fed was “closer, or maybe even there”, but that it was “prepared to do more” and future policy decisions would be made on a meeting-by-meeting basis. Powell also indicated that a pivot to cutting rates would not occur this year.

ECB scales back rate increases

The ECB also increased interest rates by a quarter of a percentage point last week, scaling back from its three previous half-percentage point increases. The move takes the main policy rate to 3.25%.

However, Lagarde indicated that the fight against inflation is far from over. “We have more ground to cover and we are not pausing, that is extremely clear,” she said. Lagarde added that some of the ECB’s rate-setters had called for a bigger increase and that the “inflation outlook continues to be too high for too long”. Headline inflation in the eurozone rose for the first time in six months in April to 7.0% year-on-year, up from 6.9% in March.

Housing market shows signs of stabilising

Here in the UK, data from the Bank of England suggested the housing market could finally be stabilising after the turmoil caused by last autumn’s mini-budget. Net mortgage approvals rose for a second consecutive month to 52,000 in March, up from 44,100 in February and much higher than expected. This came after data from Nationwide showed UK house prices unexpectedly rose by 0.5% in April, following seven consecutive months of declines. The cost of an average home increased to £260,441, which was still 2.7% lower than a year ago.

Please check in again with us soon for further relevant content and news.

Chloe

11/05/2023

Please see below article received from EPIC Investment Partners this morning, which provides a succinct and interesting insight into the success of Louis Vuitton’s parent company, LVMH.

Last week LVMH, the parent company of Louis Vuitton, surpassed USD500bn in market value, the first European company to reach the half a trillion-dollar mark, less than two weeks after joining the club as one of the world’s top 10 most valuable companies. LVMH, which also includes brands such as Moët & Chandon, Hennessy, Givenchy, and Bulgari under its umbrella, reported a 17% rise in first-quarter sales earlier in April, more than double analyst expectations. In total, LVMH controls around 60 businesses that manage 75 prestigious brands. The shares were up nearly 33% year to date.

The rise in LVMH stock means that its co-founder, chairman and chief executive, Bernard Arnault’s net worth now approaches USD213bn, the world’s richest man, and a staggering USD50bn more than the world’s second richest, Elon Musk.

Arnault’s vice-like grip on the company is also pretty much guaranteed in the long term after he recently appointed his offspring to key positions within the business. The eldest child, Delphine, was named CEO of Christian Dior, the empire’s second-largest brand. Antoine, her brother, was appointed head of the holding corporation that oversees LVMH and the Arnault family fortune.

His three youngest children were also given important roles within the company. Alexandre is an executive at Tiffany, Frédéric is the chief executive of TAG Heuer, while the youngest, Jean, heads marketing and product development for Louis Vuitton’s watch division.

According to some articles, Arnault, 74, in giving his children the positions, is auditioning them to see which one will be the best fit for the top job the day he decides to hang his boots up. It is reported he invites his offspring to a monthly lunch at the company’s headquarters in Paris, where he asks them for advice, their thoughts on how the company should move forward and even presents a list of topics up for discussion.

However, as the CEO of LVMH’s fashion arm, Sidney Toledano, said recently “there is no guarantee that any of his children will succeed him”.

Please check in with us again soon for further market content and news.

Chloe

03/05/2023

Please see below ‘Markets in a Minute’ article received from Brewin Dolphin yesterday afternoon, which provides a positive global market update.

Stock markets rose last week as signs of economic growth and easing inflationary pressures boosted investor sentiment.

The FTSE 100 ended its holiday-shortened trading week up 1.7% after figures showed the UK economy rose above its pre-pandemic levels in February. The pan-European Stoxx 600 also rose 1.7% following increases in eurozone industrial output and investor morale.

In the US, the S&P 500 and the Dow advanced 0.8% and 1.2%, respectively, as the annual rate of inflation slowed to its slowest pace since May 2021.

In Japan, the Nikkei 225 surged 3.5% after Warren Buffett said he intended to add to his investments in Japanese stocks. China’s Shanghai Composite edged up 0.3% as investors weighed a surprise 14.8% year-on-year increase in exports against softer-than-expected inflation.

Investors await slew of quarterly earnings

Stock markets had a quiet trading day on Monday (17 April) as investors braced themselves for this week’s raft of US quarterly earnings reports. Bank of America, Morgan Stanley, Netflix and Tesla are all due to release their results this week.

In economic news, a report from the Federal Reserve Bank of New York showed factory sector activity in the region significantly improved in April. The NY Empire State manufacturing index rose from -24.6 in March to +10.8 in April, smashing forecasts of -18 and marking the first increase in five months.

UK economy rises above pre-Covid levels

Figures released by the Office for National Statistics (ONS) last week showed the UK economy has finally risen above its pre-Covid levels. Although gross domestic product (GDP) was unchanged between January and February, revisions to data from previous months meant the economy ended the month 0.3% bigger than in February 2020.

February’s reading was held back by strike action in the services sector and was below the 0.1% expansion forecast in a Reuters poll. However, an upwardly revised 0.4% expansion in January led several commentators to speculate that the economy is unlikely to have contracted in the first quarter. Only a month ago, the Office for Budget Responsibility said GDP would shrink by 0.4% in the first quarter.

US inflation falls to 5.0%

Over in the US, investors were encouraged by figures that showed consumer inflation eased in March to its slowest pace since May 2021. The consumer price index (CPI) rose by 5.0% year-on-year, down from 6.0% in February, according to the Bureau of Labor Statistics.

Energy prices decreased 6.4% year-on-year, with gasoline and fuel oil falling 17.4% and 14.2%, respectively. In contrast, electricity rose 10.2% over the year, while natural gas grew by 5.5%. Food at home prices rose 8.4%, whereas food away from home prices rose by 8.8%.

Core inflation (excluding food and energy) rose by an annualised 5.6% in March. The largest driver was shelter, which grew 8.2% over the year and accounted for over 60.0% of the total increase. Other indexes that saw notable increases included motor vehicle insurance (15.0%), household furnishings and operations (5.6%), recreation (4.8%) and new vehicles (6.1%).

On a monthly basis, headline inflation rose by a lower[1]than-expected 0.1% in March, down from 0.4% in February, while core inflation grew 0.4% in March, down from 0.5% in February.

Producer prices unexpectedly fall

Further evidence of easing inflationary pressures came from the US producer price index (PPI) report. This showed prices paid by businesses unexpectedly fell by 0.5% in March, bringing the year-on-year increase to 2.7%, the smallest annual rise since January 2021.

Two thirds of the decline was attributed to falling goods prices, particularly energy, which decreased 6.4%. In contrast, when excluding food and energy, goods prices grew 0.3%.

Services also saw a decline of 0.3% in March, the largest decline since April 2020. This was primarily driven by a 0.9% drop in trade services margins.

Core PPI – which excludes food, energy and trade services – gained 0.1% in March, down from 0.2% in February. On an annualised basis, the index grew by 3.6%.

Eurozone industrial production rises

In the eurozone, figures from Eurostat showed industrial production grew by more than expected in February, thanks to easing supply chain issues and low energy prices. Industrial production rose by 1.5% month-on[1]month, bringing the year-on-year increase to 2.0%.

Further encouraging data came from the Sentix index of investor morale, which rose in April after dipping in March. The assessment of current conditions rose to the highest level in more than a year.

Please check in again with us soon for further relevant content and news.

Chloe

19/04/2023

Please see below Markets in a Minute article received from Brewin Dolphin yesterday evening, which provides a global market update.

All major indices finished last week in the green as rising oil prices helped to boost energy stocks, while fears of financial instability eased.

In Europe, the Stoxx 600 gained 4.0% and Germany’s Dax added 4.5% after eurozone inflation eased to 6.9% year-on[1]year in March, down from 8.5% in February. The UK’s FTSE 100 rose 3.1% after fourth quarter gross domestic product (GDP) figures were revised upwards.

Over in the US, the Dow added 3.2% and the Nasdaq rose by 3.4% in a week that saw the Federal Reserve’s preferred inflation gauge rise by a less-than-expected 0.3% in February.

China’s Shanghai Composite edged up 0.2% and the Hang Seng gained 2.4% after premier Li Qiang said China would work to expand its domestic market, improve the business environment, and prevent financial systemic risks.

Markets mixed as global oil output cut

Markets closed with mixed results on Monday (3 April) following a decision by the Organisation of Petroleum Exporting Countries (OPEC+) to cut oil output by more than one million barrels per day. The move could harm efforts to cool global inflation, and has raised new concerns about a further US interest rate hike in May.

The pan-European Stoxx 600 ended the day down 0.1%, whereas the UK’s FTSE 100 gained 0.5%. Energy stocks performed particularly well, with Shell and BP adding 4.5% and 4.3%, respectively. In the US, the Dow gained 1.0% and the S&P 500 rose by 0.4%.

In economic news, the Institute for Supply Management’s manufacturing purchasing managers’ index slipped by more than expected in March to 46.3, the lowest level in nearly three years, as new orders declined.

US core inflation cools

Last week saw the release of the closely watched US core personal consumption expenditure (PCE) index – the Federal Reserve’s preferred measure of inflation. Core PCE, which excludes food and energy, rose by a lower-than-expected 0.3% in February, an improvement on the 0.5% increase seen in January. On an annual basis, core PCE increased by 4.6%, down slightly from 4.7% in January.

Headline PCE, which includes food and energy, grew by 0.3% month-on-month and 5.0% year-on-year, compared to 0.6% and 5.3%, respectively, in January. Food prices rose by 0.2%, goods prices by 0.2% and services by 0.3% month-on-month, while energy prices declined by 0.4%.

Eurozone inflation eases

The eurozone headline inflation rate slowed to 6.9% in March from 8.5% in February, according to figures released by Eurostat on Friday. This was lower than the 7.1% increase forecast by economists and represented the largest drop since 1991. The decline was largely driven by a reduction in energy costs, which helped to ease cost[1]of-living pressures. Annual energy inflation fell from 13.7% to -0.9%. In contrast, prices for tobacco, food and alcohol grew by 15.4% in March year-on-year.

Core consumer price growth, which excludes food and energy, grew to 5.7% from 5.6% in February, reaching an all-time high. This result, combined with unemployment remaining low at 6.6%, has added to expectations of further interest rate hikes by the European Central Bank. Investors are broadly expecting a 0.25 percentage point increase in May, with up to two more hikes of the same size in the summer.

UK house prices see highest fall since 2009

Here in the UK, house prices fell by 3.1% year-on-year in March, the largest decline since July 2009, according to figures from Nationwide. Prices fell by 0.8% month[1]on-month, the seventh-consecutive monthly decline. The average house price in the UK is now £257,122.

Separate data from the Bank of England showed the number of mortgage approvals increased to 43,500 in February, up from 39,600 in January. This was the first rise in six months. Meanwhile, net mortgage lending dropped from £2bn in January to £0.7bn in February, the lowest level since 2016 (excluding Covid).

Revised US and UK GDP figures released

Figures released by the Commerce Department last week showed the US economy grew by slightly less than expected in the fourth quarter of 2022. GDP grew at an annual pace of 2.6%, lower than the previous estimate of 2.7% and down from 3.2% in the third quarter. This was driven by downturns in exports, non-residential fixed investment, state and local government spending, and a decline in consumer spending to 1.0%.

Economists have predicted US GDP will grow by up to 3.2% in the first quarter of this year. On an annual basis, expectations are for growth of 0.3 percentage points to 1.2%. Sentiment has been dampened due to recent turmoil in the banking sector.

Meanwhile, revised figures from the Office for National Statistics showed the UK avoided a technical recession in the fourth quarter of last year as GDP grew by 0.1%. GDP in the third quarter showed a decline of 0.1%, a smaller contraction than initially thought. A technical recession is defined as two consecutive quarters of contraction.

Please check in again with us soon for further relevant content and market news.

Chloe

05/04/2023