Week ending 10 January 2025
Data releases highlighted stubborn inflation: inflation in Europe back to July highs.
Mixed equities performance across the world: Europe was up but China and the US decreased.
Weekly Market Commentary
Week ending 10 January 2025
UK 30-year government bonds increase: to highest level since 1998.
Welcome to our weekly market update. Our focus is on providing clear, concise insights into stock and bond market movements and the broader economic landscape. The views expressed here are subject to change without notice and we can’t accept any liability for any loss arising directly or indirectly from any use of it. This is for your information only. It is not a recommendation or advice, if you’re unsure about anything please speak to your financial adviser.
Market Review
Global bonds fell while global stocks were mixed over the course of the week.
US inflation fears, potential tariffs and government spending levels cause uncertainty. European equity markets increased after positive service sector data while stocks in China came under pressure from US policies.
This week’s US International Safety Management (ISM) Services Purchasing Managers’ Index (PMI) data for December 2024 showed the US service sector expanded by a larger amount than expected. But the main thing that caught investor’s eye is the ‘prices paid’ (ie the cost of paying for services) component of
the data, which was higher than expected.
In Europe there were also a number of data releases for December 2024. Year-onyear Consumer Price Index (CPI) inflation rate increased for a third consecutive month to 2.4%, the highest rate since July. Meanwhile the PMI suggested an improvement to output after a poor November. This data helped the European markets.
In China, equities came under pressure after the US added more companies to its military blacklist – this blacklist doesn’t include particular sanctions, but does discourage US companies from doing business with them.
Outlook
The outlook remains consistent with how it looked toward the end of 2024. Central bank interest rate cutting cycles continue to be reassessed because of data, political uncertainty and stubborn inflation. A strong US economy should be good for risk assets but differences between countries’ economies across the globe could be larger than usual. Ongoing geopolitical tensions remain a significant near-term risk.
Chart of the Week
UK 30-year gilts reached highest level since 1998. The yield on 30-year UK gilts reached over 5.3% which is the highest level for UK borrowing costs since 1998. Despite tweaking the UK fiscal rules last year, recent rises in borrowing costs could remove the government’s extra borrowing room. This has come alongside weakening growth expectations
as the UK economy stalled in Q3 2024 and the Bank of England (BoE) expects another flat rate of growth for Q4 2024. Lower growth and higher borrowing costs raises the prospect that Chancellor Reeves will either need to reduce spending or increase taxes again to meet the UK’s fiscal rules. The British pound also fell as foreign investors grew uneasy by the higher borrowing costs for the UK government.
What this means for you
Market performance and inflation levels continue to vary across the globe, strengthening the importance of maintaining a well-diversified long-term investment approach
rather than reacting to shortterm market swings. By staying committed to carefully considered plans, investors can navigate through periods of volatility and uncertainty.
Has provided the commentary within this document.
