Week ending 27 September 2024
Chinese equities had a great week: helping the world index reach an all-time high.
Weekly Market Commentary
Week ending 27 September
The government in China announced new measures: in a bid to tackle poor consumer spending.
Sterling continues to perform well: reaching a two-year high against the dollar.
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
Chinese stocks rose 10% this week following new measures to support the economy and markets. This helped lift the world index to a new alltime high. The US 10-year government bond yield rose from 3.72% to 3.79%. Despite the escalation of tensions in the Middle East, the price of oil continues to trend lower this week.
For the last 18 months the Chinese authorities have been drip feeding monetary support measures, but this week they announced a combination of measures that excited markets – a cut in borrowing rates, a reduction in reserve requirements and a new lending scheme to support equity markets. On Thursday it was reported that authorities will deploy
government spending to try and meet this year’s economic growth target of 5%. Lack of consumer spending, caused by the property market being in a severe downturn, is at the heart of China’s problems. House prices have been falling since 2021, meaning household wealth and the value of savings has fallen and completely knocked household confidence. China is also in a period of deflation (falling prices), meaning incomes aren’t growing either. The purpose of the latest measures are to create a greater desire for people to spend and invest.
Chart of the Week
Sterling’s two-year revival. Sterling hit 1.34 against the US dollar this week, the strongest level in more than two years. On a trade-weighted basis the pound is at its highest level since the UK’s 2016 vote to
Outlook
The Fed began its easing cycle this month by reducing interest rates 0.50%, focus is now shifting towards its employment target. Investor and central banks alike continue to focus on key data points including inflation, unemployment and growth, that can provide insight into the relative health of economies.
leave the European Union. A couple of factors have caused the strength – investor confidence and the expected interest rate level in the UK compared to the US. Inflation has proved more persistent in the UK. Investors don’t expect
the Bank of England (BoE) to be able to cut rates by as fast or by as much as the Federal Reserve, contributing to recent sterling strength.
What This Means for You
Again this week there have been different stories across the globe, China is looking to boost its economy and sterling reaches its strongest level against the dollar for more than two years. This is continued evidence that maintaining a well-diversified,
long-term thinking to your investment approach rather than reacting to market swings is key. By staying committed to carefully considered plans, investors can navigate through periods of volatility and uncertainty.
Has provided the commentary within this document.
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NOTE THE FOLLOWING
This guide is for general information and is not intended to address your personal and financial requirements and should not be deemed or treated as constituting financial advice. Nor does this guide constitute tax or legal advice and should not be relied upon as such. Tax treatment of investments and legal advice depends on the individual circumstances of each client and may be subject to change in the future. For further guidance on the matters discussed in this guide please speak to Shane Fox, who is a regulated financial adviser. Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.
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SAMANTHA HAGON