Market Commentary 2024

March inflation in the UK fell to 3.2% against an expectation of a fall to 3.1% which constitutes a miss.

March inflation in the UK fell to 3.2% against an expectation of a fall to 3.1% which constitutes a miss. The miss largely indicates that inflation is coming down, just not as fast as many were hoping and expecting. The relation to markets is this inflation number feeds into when and by how much the UK cuts its interest rates which consumers rely on to ease the cost of living crisis in some areas. The sticky inflation number will not be good for investors and consumers relying on a falling inflation gauge to help portfolios and household bills.

US inflation came in hotter than expected dashing all hopes of a rate cut in March.

US inflation came in hotter than expected dashing all hopes of a rate cut in March. The latest print showed core CPI (which excludes food and energy) at 3.9%, and headline CPI at 3.1% YoY, topping estimates of 3.7%, and 2.9% respectively. The surprise upshot was driven by increases in food, car insurance, medical care, and shelter, with shelter prices advancing the most. These readings from the US highlight the bumpy road ahead to bring inflation back to target and risks undermining the rosy narrative that markets had been pricing in. A scenario whereby inflation continues to moderate without tipping...

US job vacancies surprises towards the upside, with vacancies reaching 9 million versus estimates of 8.9 million.

US job vacancies surprises towards the upside, with vacancies reaching 9 million versus estimates of 8.9 million. These December figures continue to underscore the strength of the US labour market, retaining hopes that a recession could be avoided. Thus, the rosy scenario where inflation continues on its downward trajectory whilst the economy remains resilient is igniting more optimism that a soft-landing could be in sight. However, the increased job openings will likely usher the Fed further into keeping rates elevated to ensure inflation remains subdued before deciding to cut rates. Another report released Tuesday, showed that US consumer confidence increased...

We saw an uptick in headline inflation from 3.9% to 4% and a steadfast core inflation figure at 5.1%, which excludes volatile food and energy.

We saw an uptick in headline inflation from 3.9% to 4% and a steadfast core inflation figure at 5.1%, which excludes volatile food and energy. Both were above estimates by 0.2%. The BOE believes cuts will happen this year, but they need to see data indicating inflation is under control, while currently it's going in the wrong direction. Upon the stronger than expected inflation print this morning, the market is drawing back bets of early interest rate cuts that were priced in at the end of last year. The most recent numbers are indicating the prediction of slightly stickier inflation,...

The inflation print release today for Europe headline inflation staying at 2.9%.

The inflation print release today for Europe headline inflation staying at 2.9%. This announcement was in line with consensus and demonstrates the difficulty of the final stages in getting inflation back to 2% targets. The European Central Bank President, Christine Lagarde, has signalled that interest rate cuts are more likely to come in summer rather than the market consensus of spring. At the World Economic Forum in Davos, Lagarde reemphasised that they have to keep the rates restrictive until they see signs that inflation is under control. Otherwise, the ECB risks inflation remaining above the 2% target or even climbing...

Labour activity picks up again as US job growth and wage gains surpass expectations.

Labour activity picks up again as US job growth and wage gains surpass expectations. Unfortunately, this dashes all hope for an early interest rate cutting cycle as inflation is likely to remain sticky, and for longer. Nonfarm payrolls rose to 216,000 in December vs an expected 175,000, whilst hourly earnings increased by 0.4% from a month earlier. The unemployment rate held tight at 3.7%. The labour market remains to be key input into the inflationary outlook, and whilst this is a headwind, it also reflects the resilience of the US labour market driven by economic growth and consumer spending. This...