Week ending 15th September 2023.

As you can see from the accompanying table markets closed the week mostly higher.

A raft of important economic data sailed out of the US this week.

Giving the Fed food for thought, US CPI headline data reacted to the recent rise in energy prices and rising by 3.7% in August 2023 from the previous year, higher than economists’ expectations. However, core inflation, which excludes volatile elements like energy and food, decelerated to 4.3%, which was slower than the rate of 4.7% we saw in July 2023. The Fed last raised interest rates in July by a quarter-percentage point to a range between 5.25% and 5.50%—the 11^th hike since March 2022.

US inflation has crept down steadily from its peak in June of last year and, with the US job market showing signs of loosening, analysts are predicting that it could fall even further in the coming months. The market has not yet priced in if this will provide the Fed with the signal they need to pause additional interest rate increases, but we do not have too long to wait as they meet on the 19 September.

In other news, the European Central Bank (ECB) met on Thursday 14 September for its all-important conversation on interest rate hikes. The Central Bank raised its interest rate to a record high of 4% (key deposit facility rate), despite concerns that higher borrowing costs could further slow the economy down. President Christine Lagarde said that whilst inflation has slowed of late, the Bank is still pushing for it to fall even further, highlighting that they are prioritising the struggle with price growth over consumers that may be bearing the brunt of higher credit costs.

In terms of how this has affected markets, investors seem to believe they found a hint within the ECB’s meeting minutes that this hike would be the last now for some time, noting that the ECB shifted their stance from ‘rate hikes’ to keeping rates higher for longer to kill high inflation.

In China, data revealed signs of stabilisation with industrial production and retail sales rising by more than expected on year in August 2023. Industrial production increased by 4.5% year over year, above expectations of 3.9% and picking up speed from a 3.7% gain in July. It came as a result of recent support measures taken by Beijing to boost economic recovery, and it was the largest increase in industrial production since April.

Next week all eyes will be on interest rate decisions from the Federal Reserve, Bank of England, and Bank of Japan. We are also expecting economic reports such as US housing stats, UK inflation & Eurozone inflation data. UK retail sales and PMI reports from across Europe and the US.

Investment Management Team