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Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
During a holiday-shortened week with light and volatile trading, major benchmarks mostly dropped, but UK stocks rose 1.5%. Additionally, many bond markets saw gains, as recession concerns seemed to deepen and hopes for lower interest rates appeared to grow. Investors now expect interest rates to fall before year-end in both the UK and the US.
News.
Friday’s jobs report showed a monthly increase of 236,000 jobs in the US, the lowest since December 2020. However, it represents 27 consecutive months of stable job growth. The unemployment rate decreased to 3.5%, and wages increased moderately by 0.3% in March compared to February, which could alleviate inflationary concerns.
Geopolitics.
China has increased its military drills around Taiwan and Japan, conducting 120 flight sorties from an aircraft carrier over three days. Fighter jets took off and landed 80 times on the Shandong, China’s aircraft carrier, in waters east of Taiwan and south of Japan. The Japanese military responded by scrambling fighter jets.
Inflation.
The upcoming Wednesday’s Consumer Price Index Report will reveal if the US inflation’s recent decline continued in March. In February, inflation decreased for the eighth month in a row, with an annual rate of 6.0%. Inflation likely rose 0.3% in March, pushing the annual rate to 5.2%.
Central Banks.
ECB’s President Christine Lagarde, Vice President Luis de Guindos, and Chief Economist Philip Lane indicated the need for further interest rate hikes due to inflationary pressures. Other policymakers, such as François Villeroy de Galhau, Gediminas Šimkus, and Yannis Stournaras, shared the belief that rates might increase, but suggested they were close to a peak.
Commodities.
Renewed concerns about global recession have pushed oil below $80 per barrel, despite concerns around tighter global supplies. OPEC+ announced a significant output cut, while the US Labor Department’s latest jobs report suggests the Federal Reserve’s monetary policy tightening may not be over yet, clouding the growth outlook and affecting crude demand.
ESG.
The International Sustainability Standards Board (ISSB) will give companies an additional year to report some sustainability risks, prioritising climate-related reporting. ISSB’s goal is to establish global disclosure standards for sustainability that can be used alone or in broader frameworks.
Week Ahead.
The UK’s Office for National Statistics will release monthly GDP data. In February, the economy likely grew by 0.2%. The US will focus on the inflation rate, retail sales, and FOMC minutes. Expectations are low for Q1 earnings season, with an anticipated 6.8% drop in earnings for S&P 500 companies.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, Marlborough’s Multi-Asset Investment team, The Financial Times, The Wall Street Journal, John Hancock, Morningstar, Trading Economics, ESG Today.
Risk Warning: These are Nathan’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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