Written by Anthony Walters – Clever‘s Head of ESG & Christos Chountoulesis our Investment Analyst, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
Unusually, it was the Dow Jones Industrial Average ETF that led the week, with a gain of over 4% (0.70% YTD). The FTSE 100 ETF added 3.37% (4.93% YTD), followed by the S&P 500 ETF, which gained 2.60% (12.16% YTD). Interestingly, the Nasdaq 100 ETF lagged with a 0.89% gain (33.87% YTD). The tech ETF presumably paused ahead of big earnings reports this week by tech powerhouses Microsoft, Google, and Facebook, among others.
News.
Japan’s imposition of export controls on chip-making tools, restricting China’s ability to produce advanced semiconductors, is worrying some officials. From this week, Japan is restricting 23 types of equipment. But, while the U.S. referenced China 20 times in its October announcement targeting Chinese companies, Japan has chosen broad equipment controls not specifically aimed at its bigger neighbour.
Geopolitics.
Wheat prices have risen sharply on global markets after Russia said it would treat ships heading for Ukrainian ports as potential military targets. Moscow pulled out of a UN deal on Monday that ensured safe passage for grain shipments crossing the Black Sea. For the past three nights Russia has bombarded Ukraine’s grain facilities in Odesa and other cities. Moscow also warned that from Thursday any ships going there would be seen as siding with “the Kyiv regime”.
Inflation.
UK inflation cooled more than expected, with annual CPI coming in at 7.9% in June, a fall from 8.7% the prior month and below the expected drop to 8.1%. The drop in the headline figure will be welcomed by the policymakers at the Bank of England, who are likely to be further impressed with the fall in the core number to 6.9% from 7.1%. Markets have already priced another 100 basis points of Bank of England rate rises this year.
Central Banks.
The U.S. Federal Reserve, Bank of Japan and European Central Bank will all announce key interest rate decisions this week, with each potentially nearing a pivotal moment in their monetary policy trajectory. As Goldman Sachs strategist Michael Cahill put it in an email Sunday: “The Fed is expected to deliver what could be the last hike of a cycle that has been one for the books”.
Commodities.
Natural Gas rose by 8.36% for the week, spurred by higher global temperatures leading to increased demand for Natural Gas to produce electricity needed to cool buildings. Wheat added 6.37% as Russia stood firm in its insistence that it will not aid the ‘grain corridor’ from Ukraine, a major producer of Wheat. Corn also gained 6.02% for the week, whilst Oil stayed flat, with the WTI Crude contract rising by 0.98%.
ESG.
A consortium led by Virgin Atlantic announced today that it has scheduled the first-ever transatlantic flight using 100% sustainable aviation fuel (SAF) for November 28, 2023, following the successful completion of a key ground test, and pending further regulatory approvals and testing. The upcoming flight, which still requires further regulatory approvals and testing, will be conducted on a Boeing 787 Dreamliner, which will fly from London Heathrow to New York JFK.
Week Ahead.
On Wednesday, the US Federal Reserve announce their interest rate decision, widely forecast to be an increase of 0.25%. The European Central Bank follows suit on Thursday and are also expected to raise rates by 0.25%.
Also on Thursday, the US releases its Quarter on Quarter GDP figure, forecast to reduce to 1.70% from a prior reading of 2.00%.
Sources.
Anthony Walters – Head of ESG, Christos Chountoulesis – Investment Analyst at Clever Adviser Technology Ltd (Clever)
Market recap – Data sourced from FE FundInfo & Koyfin. ETFs quoted: iShares Core FTSE 100 UCITS ETF, iShares Core S&P 500 UCITS ETF, iShares Nasdaq 100 UCITS ETF. YTD (year-to-date figures quoted in Pounds Sterling).
News – As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy, by Tim Kelly, Karen Freifeld and Kentaro Sugiyama, Reuters, 24/07/23
Inflation – European stocks gain after U.K. CPI grows more slowly than expected by Peter Nurse, Investing.com 19/07/23
Central Banks – A ‘momentous week’ ahead as the Fed, ECB and Bank of Japan near pivot point, by Elliot Smith, CNBC, 24/07/23
ESG – Virgin Atlantic Plans First-Ever 100% Sustainable Aviation Fuel-Powered Transatlantic Flight this Year, by Mark Segal, ESG Today, 20/07/23
Geopolitics – Ukraine war: Wheat prices soar after Russia threatens ships, by Emily McGarvey, 21/07/23
Commodities – Data sourced from Koyfin and Investing.com
Week ahead – Data sourced from Investing.com
Risk Warning: These are Anthony’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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