Weekly podcast – Market overview
This week’s host, Investment Manager Jack Bishop, discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter and Carly Moorhouse, Fund Research Analyst. Among the topics discussed – inflation rates, Chinese equities and more.
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Market overview – Richard Carter, Head of Fixed Interest Research
Global stock markets gained last week after Beijing unveiled a raft of measures designed to boost the Chinese economy. The MSCI All Country World Index posted a 1.9% (19.2%) weekly gain, as Chinese equities enjoyed a double-digit rally, marking their largest weekly gain since 2008.
United States:
US stocks built on recent rises to move to fresh record highs, with chemicals and materials at the forefront on growing hopes of Chinese demand rebounding. Large-cap benchmarks were up 0.6% (21.6% YTD) while technology-based indices added 1.0% (21.4% YTD).
Inflation data also supported the move higher, as the Fed’s preferred gauge — core personal consumer expenditures price index — came in below expectations in August at 0.1%. The annual figure of 2.2% is the lowest reading since February 2021 and only just higher than the Fed’s 2.0% long-term inflation target.
United Kingdom:
UK equites posted a weekly gain of 1.2% (10.9% YTD), while the pound rose above the US$1.34 handle to trade at a 30-month high against the US dollar. The flash UK PMI composite output index showed an 11th consecutive month of expansion, coming in at 52.9, down from 53.8 in August.
The 10-year gilt yield was up 8 basis points on the week (+45 basis points YTD), closing at 3.98%.
Europe (excl. UK):
German equities were among the biggest beneficiaries in developed markets on the news out of China, rallying 4.0% on the week (16.2% YTD). The MSCI Europe ex UK gained 3.1%. Economic data points to slowing activity in the Eurozone, with the composite PMI output index falling into contractionary territory at 48.9, down from 51.0 in August. German business activity also declined, falling the most in seven months, as consumer confidence ticked lower. The softening data has led to increased hopes of a faster ECB rate-cutting cycle, seen as positive for equities in the near term.
Chinese bazooka
A number of stimulus measures from China sparked hopes last week that the world’s second-largest economy will receive a substantial boost. The People’s Bank of China (PBOC) cut its reserve requirement ratio for the second time this year, its seven-day repo rate and its medium-term lending facility rate as part of the package.
PBOC governor Pan Gongsheng announced the moves as part of a far-reaching stimulus package aimed at lifting the stuttering economy. Political leaders also stepped up, declaring that Beijing will provide enough fiscal spending to hit the 5% growth target for 2024. China will issue sovereign bonds to the tune of RMB2tn (US$284.4bn) to fund the stimulus.
Questions remain as to the long-term viability of this approach, as China still faces significant challenges to maintain a high growth rate and fight off deflationary forces. There is little doubting the cheer it has brought capital markets in the near term though, with massive gains for Chinese equities and a clear boost to related markets around the globe.
Author
Carly Moorhouse
Fund Research Analyst
Jack Bishop
Investment Manager
Richard Carter
Head of Fixed Interest ResearchTo listen to all the past Weekly Comment podcasts click here or subscribe via the apps below:
