February 19, 2024

The Market Review: 19 February 2024

By Anthony Walters

  • Blinken’s South American Tour
  • US Consumer Prices Surge in January
  • Lagarde Cautions Against Early Interest Rate Cuts
  • AXA IM Enhances Corporate Governance Policy

Market Recap.

The FTSE 100 ETF was the only major gainer for the week, adding 1.99%. The Dow Jones Industrial Average ETF was flat, returning 0.08% whilst both the S&P 500 and Nasdaq 100 ETFs fell by 0.10% and 1.00% respectively.

Markets cooled on the back of sticky inflation data, prompting some to speculate that interest rates could remain higher for longer.

News.

British inflation unexpectedly held steady at 4.0% in January, defying forecasts of a rise, official data showed, offering relief for the Bank of England (BoE). Economists had expected an increase in the annual rate to 4.2%.

Consumer price inflation – which surged as high as a 11.1% in October 2022 – is expected to fall further in the coming months, paving the way for the BoE to start cutting borrowing costs from their 16-year high. Meanwhile the UK economy slipped into a technical recession in the final quarter of last year, initial figures showed. The Office for National Statistics said U.K. gross domestic product shrank by 0.3% in the final three months of the year, notching the second consecutive quarterly decline.

Geopolitics.

U.S. Secretary of State Antony Blinken will travel next week to Brazil and Argentina, where he is set to meet with both countries’ leaders to discuss “bilateral and global issues,” the State Department said on Friday. In Rio, he expects to “engage world leaders on our shared initiatives for increasing peace and stability” and address international efforts to support Haiti as the country grapples with an escalating humanitarian crisis and spikes of violence.

Inflation.

U.S. consumer prices rose more than expected in January amid a surge in the cost of rental housing, but the pick-up in inflation did not change expectations the Federal Reserve will start cutting interest rates in the first half of this year.

The increase in prices reported by the Labor Department on Tuesday was the largest in four months and occurred against the backdrop of labor market strength and economic resilience. But January is typically a strong month for inflation readings as businesses push through prices increases at the start of the year, which some economists believed were not completely addressed by the model used by the government to strip out seasonal fluctuations from the data.

Central Banks.

The European Central Bank must avoid cutting interest rates too early because that could prolong high inflation and even force the bank to tighten policy again, ECB President Christine Lagarde said.

“The last thing that I would want to see is us making a hasty decision (only) to see inflation rise again and have to take more measures,” Lagarde told a parliamentary hearing in Brussels.

Commodities.

WTI Crude Oil gained 3.21% for the week whilst Natural Gas fell by 13.39% after figures from the Energy Information Administration revealed that less gas was withdrawn from storage than forecast, as warmer-than-normal weather kept heating demand low. Copper was the major mover in the metals (3.74%) whilst in the softs, Wheat fell by 6.03% as full silos and strong availability of wheat in Russia pressured prices, forcing farms in the US and Europe to lower their asking prices in local and foreign markets.

ESG.

AXA Investment Managers (AXA IM) has announced that it has updated its corporate governance & voting policy with more stringent ESG expectations for companies, including a pledge to target high emissions companies lobbying against the goals of the Paris Agreement. According to AXA IM, the new policy comes amidst an intensifying political backlash against climate-related regulation, contrasting with the urgent need for effective policy intervention to enable a just and orderly transition, highlighting the importance of climate lobbying issues.

Week Ahead. 

US Markets pause on Monday as the nation celebrates (George) Washington’s birthday. Wednesday sees key central bankers giving speeches, including Raphael Bostic and Michelle Bowman for the US Federal Open Market Committee and Dr Swati Dhingra for the Monetary Policy committee of the Bank of England.

On Thursday the EU will publish its inflation figures, with year on year CPI expected to be 2.80% from 2.90% prior. On the same day, the US will report existing home sales with 3.96m expected compared to 3.78m prior.

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Sources.
Anthony Walters – Head of ESG 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 (quoted in Pounds Sterling). News – UK inflation holds at 4.0% in relief for BoE and Sunak, by Suban Abdulla, Reuters, 14/02/24 and UK economy slipped into technical recession at the end of 2023, by Elliot Smith, CNBC, 15/02/24. Inflation – Rising rents push US inflation higher; rate cuts still expected in 2024, by Lucia Mutikani, Reuters, 13/02/2024. Central Banks – ECB must avoid hasty rate cut, says Lagarde, by Balazs Koranyi, Reuters, 15/02/2024. ESG – AXA IM to Vote Against Companies Lobbying Against Climate Goals, by Mark Segal, ESG Today, 16/02/24. Geopolitics – Blinken to visit Brazil, Argentina for meetings with Lula, Milei By Gabriel Araujo, Reuters 16/02/24. 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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Anthony Walters

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