Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s 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.
Stock markets had a mixed performance as concerns about inflation eased, but debt-ceiling worries lingered. The UK stock market saw a very slight decline of only 0.15% for the week. US stocks lagged slightly, although the Nasdaq saw gains thanks to Google parent Alphabet’s new AI-based search platform. Bond markets were weaker as interest-rate hikes continued.
News.
Along with banking stresses and tightening credit conditions, another factor weighing on sentiment seemed to be the upcoming deadline to increase the debt ceiling —the statutory limit on federal government borrowing. We anticipate a resolution to the debt-ceiling impasse, but it may cause volatility along the way.
Geopolitics.
US National Security Advisor Jake Sullivan and Chinese diplomat Wang Yi met in Vienna to discuss US-China relations amid renewed tensions. Sullivan also expressed concerns about China supplying weapons to Russia, while Wang Yi addressed the Chinese stance on Taiwan.
Inflation.
US annual inflation dropped to 4.9% in April 2023, slightly lower than the expected 5%, following a 5% reading in March. The decrease was driven by slower growth in food inflation and falling energy costs. Core CPI, which excludes volatile items, fell by 0.1% to 5.5% in April 2023, aligning with expectations.
Central Banks.
The Bank of England raised interest rates by 0.25%, bringing the borrowing costs to 4.5%. This was driven by persistently high inflation, which may double the central bank’s target next year. Despite this, strong demand led the BoE to revise growth projections upward and rule out a recession for the foreseeable future.
Commodities.
The price of oil fell more than 5% for the week, to less than $78 per barrel, reversing recent gains and leaving prices around their levels of a month earlier, when production cuts by Saudi Arabia and other countries sent prices higher.
ESG.
An MSCI study found that over one-third of public companies now disclose Scope 3 emissions, indicating indirect emissions from their value chains. The study also highlighted a significant increase in corporate decarbonisation commitments. However, direct emissions have not decreased this year, surpassing the levels necessary to achieve the global temperature increase limit of 1.5°C.
Week Ahead.
The UK’s Q1 unemployment rate is projected to be 3.8%. Additionally, investors will closely monitor the second estimates of Q1 GDP figures for the Euro area. In the US, speeches by several Fed officials, retail trade data, industrial production, and housing indicators will be key focal points.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s CIO – Multi Asset, Marlborough’s Multi-Asset Investment team, Financial Times, The Wall Street Journal, John Hancock, Morningstar, Trading Economics, ESGToday.
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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