In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
US stocks notch largest weekly gains in two months
US stocks notched their largest weekly gains in two months as economic indicators showing easing inflation become increasingly apparent to the Federal Reserve.
Wall Street’s blue-chip S&P 500 rose 0.4% on Friday, taking the weekly growth to 2.7%. The Nasdaq Composite climbed 0.7%, taking gains over the past five sessions to 4.8%.
The indices had their largest weekly advances since mid-November, and notched back-to-back weekly gains following four weeks of consecutive losses across the board.
The week’s price rally was driven by data that showed annual US inflation had declined for the sixth consecutive month to 6.5%, the lowest consumer price index reading in more than a year.
Although investors are weighing the medium-term outlook for the sector against debate about a potential entry into recession later this year, lenders have briefly benefited from the Federal Reserve’s aggressive campaign to raise interest rates as it combats inflation.
US inflation falls to lowest in more than a year
US inflation was 6.5% over the 12 months to the end of December, down from 7.1% in November, the US Labor Department said.
That was the smallest increase in more than a year, and marked the sixth month in a row that the pace dropped.
Some items saw outright price falls in December compared with November.
Overall, prices slipped 0.1% over the month, driven by the observed fall in petrol prices across the nation.
Authorities in the US have been fighting to stabilise prices, which took off in 2021 as the economy roared back to life after pandemic lockdowns and companies facing shortages and rising costs hiked prices to unexpected heights.
However this new economic situation is being closely watched, as the slowdown from higher rates also risks tipping the world's largest economy into a recession.
UK economy defies expectations with unexpected November growth
The latest published data for the UK economy shows an expansion of 0.1% across the month of November, helped by demand for services in the tech sector in spite of households being squeezed by rising prices.
The Office for National Statistics (ONS) said pubs and restaurants also shared a boost in growth with the addition of the World Cup in November.
Although the November reading of gross domestic product was much better than anticipated, the overall picture still suggests the economy is currently stagnating as food and energy bills go up and people cut back as a result.
Economists have suggested that the latest data makes it less clear whether the UK will have entered a recession at the end of last year.
Sri Lanka's central bank urges China and India to reduce its debts:
The crisis-hit Indian Ocean state defaulted on its debt repayments and has looked to negotiate a $2.9bn (£2.4bn) bailout deal.
But the International Monetary Fund will not release the cash until China and India first agree to reduce Sri Lanka's billions of dollars of debt.
The economic turmoil sparked mass protests last year, which resulted in the former president fleeing the country in July.
The World Bank estimates that Sri Lanka's economy shrank by 9.2% in 2022 and that it will contract by a further 4.2% this year.
Beijing's lending to Sri Lanka stands at around $7bn while India is owed around $1bn.
The Sri Lankan government had initially hoped to agree a new payment plan with China and India by the end of 2022.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
US economy sees robust jobs growth in December
US employers added 223,000 positions in December, pushing the jobless rate down to 3.5%, from 3.6% in November.
The resilience of the labour market has raised hopes that the world's largest economy will avoid a severe economic downturn this year.
The US central bank has been raising borrowing costs in an attempt to cool the economy and ease the price pressures currently being faced.
US economic growth has slowed sharply since 2021, when it boomed after the pandemic reopening.
The most recent report showed prices in the US climbing 7.1% from a year earlier - far faster than the 2% previously considered healthy.
Spain announces €10bn help to fight rising prices
Spanish Prime Minister Pedro Sánchez has announced another €10bn (£8.8bn) in support to help address rising prices following Russia's continued invasion of Ukraine.
The proposals include significant cuts to VAT and a €200 one-off payment for millions of households on less than €27,000 a year.
It's Spain's third set of aid measures and brings total support to €45bn.
Spain has succeeded in bringing down inflation in recent months to 6.8%, the lowest annual rate in the European Union and the lowest figure since the Russian invasion of Ukraine in February 2022.
Public transport will also continue to be subsidised - with a discount on season ticket prices extended until the first half of 2023 - but a 20-cent-per-litre fuel discount for consumers will be restricted to a few job sectors.
Third of world in recession this year, IMF head warns
It comes as the war in Ukraine, rising prices, higher interest rates and the spread of Covid in China weigh on the global economy.
In October the IMF cut its global economic growth outlook for 2023.
Figures released over the January period pointed to weakness in the Chinese economy at the end of 2022.
For decades the Asia-Pacific region has depended on China as a major trading partner and for economic support in times of crisis.
Now Asian economies are facing the lasting economic effects of how China has handled the pandemic with its controversial zero covid policy.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
UK electricity companies warn of cash crunch risk.
Electricity companies are urging the UK government to boost access to a £40bn state-backed liquidity support scheme, as continued price volatility in wholesale power markets reignites fears that some suppliers and generators might run out of cash.
The Treasury and Bank of England in October set up an emergency liquidity facility to tackle the margin requirements faced by power generators and suppliers that hedge their sales or energy purchases in the futures market.
The UK has followed a string of other European governments in offering liquidity support to the sector.
Trade body Energy UK told the Financial Times it remained “very concerned” about financial liquidity across the UK power industry “over the coming months”.
Any company that makes use of the scheme will be blocked from paying dividends or bonuses to executives.
Energy UK and individual suppliers have raised the matter in meetings with the government since the scheme’s launch, according to people familiar with the situation.
Singapore's crypto ambitions shaken
Authorities had signalled an early interest in harnessing blockchain technology.
In 2021, investment in the industry in Singapore increased tenfold compared to the previous year to $1.48bn (£1.2bn).
Making up nearly half the Asia Pacific total for the year.
Crypto assets and companies - many with links to Singapore - have imploded, causing reverberations and sparking losses around the world.
For Singapore, the FTX collapse was particularly shocking. Its state investment fund Temasek had invested in the exchange, pumping in $275m over several months.
A few months later, Singapore-based crypto hedge fund Three Arrows filed for bankruptcy, taking down crypto exchange Voyager Digital with it.
It is thought that the closures of key market players this year has wiped out $1.5 trillion in crypto market capitalisation.
Tail investors were hurt too, and many believe the Singaporean authorities should have done more.
Covid outbreak throws Chinese factories and supply chains into chaos
The coronavirus sweeping across China is causing widespread business disruption as staffing shortages threaten to close down factory production lines, bringing chaos to supply chains.
The Omicron variant of the virus has begun to run rampant through several big cities since the sudden U-turn on president Xi Jinping’s former zero-Covid policy of containment earlier this month.
Many office workers have begun to work from home but some factories are becoming thinly staffed as workers call in sick.
Business owners and executives said this was causing increasing disruption to production and supply chains.
Companies have been left with no direction on how to handle the sudden surge in cases, after previously operating under strict guidelines handed down by local governments.
Factory bosses are now either loosening all controls or isolating workforces to keep production lines functioning.
There are early signs of a rebound in domestic and international travel but not yet strong enough to make an impact.
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In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
European stocks waver ahead of central bank rate decisions
European stocks fell and US futures were muted on Monday ahead of a potentially pivotal week for global financial markets.
Central banks on both sides of the Atlantic are expected to signal a big shift in their fight against inflation by slowing the pace of interest rates rising.
The regional Stoxx Europe 600 opened 0.6 per cent lower in early dealings and London’s FTSE 100 lost 0.3 per cent.
Asian equities kicked off the week lower, with Chinese technology and property stocks leading losses, having rallied at the end of last week.
Hong Kong’s Hang Seng index fell 2.2 per cent while China’s CSI 300 lost 1.2 per cent and South Korea’s Kospi lost 0.6 per cent. Japan’s Topix shed 0.2 per cent.
The Hang Seng Mainland Properties index, which tracks some of China’s largest developers, fell 7.5 per cent, while the Hang Seng Tech index lost 4.1 per cent.
Microsoft to take 4% stake in London Stock Exchange Group
Microsoft has agreed to buy a £1.5bn stake in the London Stock Exchange Group as part of a 10-year strategic partnership between the US software company and the 300-year-old UK exchange.
The deal, announced on Monday, marks the latest tie-up between finance and Big Tech.
In November, Google invested $1bn in Chicago-based CME as part of a 10-year cloud computing deal.
Under the agreement, Microsoft will buy a 4 per cent stake in LSEG worth about £1.5bn from Blackstone, Thomson Reuters, Canada Pension Plan Investment Board and Singapore’s sovereign wealth fund GIC.
Microsoft will help improve the exchange’s data and analytics and the companies
They plan to use Microsoft Teams, the tech giant’s business communications platform, to connect users. They also intend to use Microsoft’s machine learning capabilities to help investment group
National Grid asks ‘contingency’ coal plants to fire up as cold grips UK
The UK electricity grid operator has instructed two emergency-use coal generators to start warming up as the network faces its first big test of the energy crisis.
With demand across the country soaring as temperatures dip below zero.
The National Grid Electricity System Operator said on Monday morning that it had asked the “contingency” plants to prepare for operation “to give the public confidence” in energy supplies, adding that people should continue to “use energy as normal”.
The two Drax coal-fired generation units, which the government requested to be on standby this winter, may not be needed to supply power to the grid as soon as Monday.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Europe cuts gas demand by a quarter in a bid to shed reliance on Russia
EU countries cut gas demand by a quarter in November even as temperatures fell.
It is the latest evidence that the bloc is succeeding in reducing its reliance on Russian energy since Moscow’s full-scale invasion of Ukraine.
Provisional data from commodity analytics company ICIS showed gas demand in the EU was 24 per cent below the five-year average last month, following a similar fall in October.
In 2021, the EU imported 155bn cubic metres of natural gas from Russia.
With European citizens having help through autumn with the unseasonable warmth the temperatures are starting to drop closer to normal levels.
In Germany and Italy, the EU’s two largest gas-consuming countries, demand fell 23 and 21 per cent respectively in November.
In France and Spain, it fell more than a fifth and in the Netherlands by just over a third.
Europe has also imposed sweeping new restrictions on Russia’s oil exports to limit its use of that energy source too.
War and adverse weather set to keep food prices high
Climate change and the war in Ukraine are set to keep food prices at far higher levels than before the Covid-19 pandemic.
Wholesale food prices have stabilised over recent months.
Hopes that the surge in the retail cost of staples such as rice, bread and milk seen in the past two years would diminish in 2023.
After several years of bumper crops thanks to favourable weather conditions, grain prices firmed during the pandemic because of hoarding by consumers, companies and governments.
Although costs have fallen back from the peak, prices remain high by historical standards and data from consultancy CRU show fertiliser remains unaffordable for many.
Russia’s invasion has affected three Ukrainian crop cycles so far. The 2021 harvest was prevented from leaving the country once the war broke out.
The 2022 crops faced harvest and infrastructure issues, with key areas becoming war zones. Next year’s crop yields are expected to fall sharply.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Chinese stocks drop after zero-Covid protests add to the uncertainty.
Global stocks and oil prices dropped last week after protests in China against the government’s Covid-19 policies weighed down on market sentiment and added to uncertainty about the outlook for the world’s second-largest economy.
In Hong Kong, the Hang Seng China Enterprises index dropped as much as 4.5 per cent before pulling back to 1.5 per cent.
The decline on China’s CSI 300 index of Shanghai and Shenzhen listed shares was as great as 2.8 per cent before it was trimmed to about 1.1 per cent.
Europe’s regional Stoxx 600 slid 0.8 per cent in mid-morning trading on Monday, while London’s FTSE 100 dropped 0.5 per cent. The S&P 500 was set to shed 0.9 per cent.
Oil dropped sharply, the international benchmark, down 2.8 per cent to trade at $81.31 a barrel, and US marker West Texas Intermediate shedding 2.8 per cent to hit $74.12.
The unrest weighed down on equities elsewhere in Asia, with Japan’s benchmark Topix down 0.7 per cent, while South Korea’s Kospi and Taiwan’s Taiex were both off 1.5 per cent
Gold at more than one-week high as dollar slips
Gold prices rose last week due to the weakened US dollar and ongoing protests in several Chinese cities about the country’s strict Covid-19 restrictions.
Spot gold was down 0.4% at $1,749.00 per ounce, as of 0314 GMT. U.S. gold futures fell 0.2% to $1,749.90.
The dollar index was up 0.4%, making the greenback-priced bullion more expensive for buyers holding other currencies.
Spot silver also slipped 1.8% to $21.21, platinum fell 0.3% to $978.00 and palladium declined 0.3% to $1,846.94.
UK house-buying demand drops 44% in wake of ‘mini-Budget
Housing demand in the UK has almost halved in the wake of Liz Truss’s September “mini” Budget.
Home hunters respond to higher mortgage rates by scrapping plans to buy and turn to the rental market instead.
Demand is down 44 per cent since the day of the “mini” Budget, with the sharpest falls in south-east England and the West Midlands.
Plummeting demand has raised expectations that prices will fall next year, with the Office for Budget Responsibility now forecasting a 9 per cent drop.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
UK house prices are expected to fall by almost 10% over the next couple of years, the Office for Budget Responsibility has predicted.
Following Jeremy Hunt’s autumn statement last week, housing prices are expected to fall and mortgage interest rates are expected to increase.
A drop of 9% is expected between now and autumn 2024, the Office for Budget Responsibility (OBR) has said.
The cost of a mortgage is also likely to stay much higher than homeowners have become accustomed to during the last decade.
A typical two or five-year fixed-rate deal currently has an interest rate of just over 6%.
It is forecast that there will still be an average increase in property prices this year of 10.7% despite the recent slowdown.
That will be followed by two years of falls, with house prices down by 1.2% next year, and 5.7% in 2024.
Then the OBR suggests that property prices will start to rise again at a rate slightly faster than people's incomes - up by 1.2% in 2025, 3% in 2026 and 3.5% in 2027.
US inflation rate drops to 7.7%
US inflation was lower than forecast last month, a welcome sign that the surge in prices may be fading.
The US consumer prices index rose by 7.7% in October, down from 8.2% in September, a bigger fall than expected.
That’s the lowest annual inflation reading since January 2022.
There are signs that inflation is cooling off. Gas prices are down about $0.10 over the past month.
But the inflation rate remains far above the Fed's 2% target, meaning aggressive actions by the central bank are likely to continue.
China’s property sales are set to plunge 30%
China’s property sales will likely drop by about 30% this year - nearly two times worse than their prior forecast.
Such a drop would be worse than in 2008 when sales fell by roughly 20%.
Now with the mortgage strikes, the recovery of China’s real estate sector has been delayed to next year rather than this year.
The suspended mortgage payments could affect 974 billion yuan ($144.04 billion) of such loans - 2.5% of Chinese mortgage loans, or 0.5% of the total loan.
Although the number of mortgage strikes increased rapidly within a few weeks, analysts generally don’t expect a systemic financial crisis.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
London loses its status as the biggest European stock market to Paris
Britain's stock market has lost its position as Europe's most-valued stock market to Paris, as economic growth concerns weigh on UK assets.
France has taken the top spot as the combined value of its companies' shares has been boosted by currency movements and demand for French luxury goods.
It is the first time Paris has overtaken London since records began in 2003.
The gap between the UK and French stock markets has been narrowing since Brits voted to leave the European Union in 2016.
The combined value of British shares is now around $2.821 trillion, while France's are worth around $2.823 trillion.
London's FTSE 250 share index - which lists medium-sized companies - has slumped by almost 17% in the last 12 months.
By contrast, the UK's FTSE 100 index, which is made up of bigger companies is down just 0.2% this year, versus the 17% plunge for the FTSE 250.
Currency movements have also worked in Paris’ favour, as the pound has tumbled 13 per cent against the US dollar this year, while the euro has lost only 9 per cent.
One company which boosted sales was Louis Vuitton, as it had a surge of a 22% increase in the last six months as China eased lockdowns and its shoppers returned to pre-pandemic habits.
Will US inflation rates keep rising?
Americans grew more worried about inflation in October, with fears coming from an expected rise in gasoline prices.
Inflation expectations for the year ahead rose to 5.9%, up half a percentage point from September to the highest level since July.
Three-year expectations also accelerated to 3.1%, while the five-year outlook rose to 2.4%, respective increases from 2.9% and 2.2%.
Respondents think gas prices will increase by 4.8% over the next year, up from 0.5% in September for the biggest one-month increase in survey data that goes back to June 2013
Metaverse could pump $1.4 trillion a year into Asia’s GDP
The metaverse’s contribution to gross domestic product in Asia could be between $800 billion and $1.4 trillion per year by 2035. That would make up roughly 1.3% to 2.4% of the overall GDP.
The metaverse can be loosely defined as a virtual world where people live, work and play with cryptocurrency. 60% of the world’s youths live in Asia. On top of that, there are 1.3 billion mobile gamers in Asia, making up the world’s largest player base.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Chinese exports fall for the first time since 2020
China’s exports unexpectedly fell in October, with a drop in the value of goods sold to the U.S. and the EU.
Surging inflation and rising interest rates hammered global demand while new COVID-19 curbs at home disrupted output and consumption.
The drop marked a sharp decline from a 5.7% year-on-year increase in September, and the first year-on-year drop since May 2020
Last month, imports fell in October by 0.7% in U.S.-dollar terms, also missing expectations for slight growth of 0.1% and down from a 0.3% increase in September.
China’s exports to the European Union fell by 9% in October, after growing in September.
In the three months to the end of September, China’s economy grew just 3.9 per cent year on year, below a 5.5 per cent target that was already the lowest in three decades.
Lockdowns of big cities to contain small outbreaks have weighed on consumer demand, with retail sales adding just 2.5 per cent in September.
China on Friday launched its fifth International Import Expo in Shanghai, a vast conference that hosts thousands of foreign and domestic companies.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Wheat prices soar as Russia threatens global supplies
Wheat and corn futures soared on world markets after Russia pulled out of a deal to allow grain exports from Ukraine through the Black Sea.
The most-traded wheat contract on the Chicago Board of Trade jumped as much as 7.7% to $8.93 a bushel at the open on Monday, the highest since 14 October, and later traded at $8.79.
Corn prices rose as much as 2.8% to $7 a bushel and soybean oil gained 3%.
Data is expected to show eurozone inflation hitting a new record high of 10.3% in September, partly because of higher food prices.
The European Central Bank whose primary target is to control inflation, on Thursday confirmed further rate hikes in the coming months in an attempt to bring prices down.
Will UK tax prices increase?
All earners in the UK, not just the wealthiest, will need to pay higher taxes if public services like the NHS are to improve, an ex-Chancellor has warned.
The pound fell to a record low against the dollar at the end of September and government borrowing costs rose in the wake of then-Chancellor Kwasi Kwarteng's mini-budget, where he announced major tax cuts without detailing how they would be paid for.
Jeremy Hunt, who replaced Mr Kwarteng as Chancellor, needs to find billions of pounds of savings to keep the UK's debt under control
Chancellor Jeremy Hunt will set out his tax and spending plans for the UK on 17 November, two weeks later than originally expected.
Sri Lanka Inflation Slows for First Time in Year in October
Sri Lanka’s key inflation rate slowed to 66% in October after hitting 69.8% in September
The surge in the Colombo Consumer Price Index (CCPI) was led by an 85.6% jump in food prices and a 56.3% climb in the non-food group
The country battles its worst economic crisis since its independence in 1948
Canada’s economy gearing down
Canada’s growth rate fell by half in the third quarter from its pace in the first six months of the year, ahead of what’s expected to be an even sharper downturn later this year.
The pace of monthly gains was enough to produce annualized growth in the third quarter of 1.6 per cent.
A preliminary estimate from Statistics Canada, versus a 3.3 per cent pace in the second quarter and 3.1 per cent during the three first months of the year.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
China’s GDP rose 3.9% in the July to September quarter but remains on track to deliver among the weakest growth in almost four decades
China released a set of economic figures which had been postponed from the previous week.
Their economy expanded faster than economists expected in the September quarter. Still, the poor performance of the nation’s property market and weak retail and import data underscored the nation’s ongoing growth challenges.
Official figures showed that China's economy grew 3.9% in the July to September quarter from the same time last year, beating estimates.
That marked a pick-up from the 0.4% increase in the second quarter when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial centre and a key global trade hub, was shut down for two months in April and May.
But the newly released 3.9% growth rate was still below the annual official target that the government set earlier this year.
Japan made a second intervention this month to stop the Yen from falling
Japanese authorities are likely to have spent more than $30bn last week in their second intervention to stop the Yen from falling any lower.
The intervention took place on Friday after the yen hit ¥151.94 to the dollar, causing it to briefly surge to ¥144.50 during a typically quiet time of the week for trading.
The yen closed around ¥147 on Friday.
The Bank of America estimated after last month’s intervention that the Japanese government, which has $1.3tn in foreign reserves, could execute up to 10 more interventions by selling liquid assets.
The Pound gains as Rishi Sunak leads the race to become Prime Minister
Rishi Sunak, the former chancellor is on course to become Britain’s new prime minister, after Boris Johnson quit the contest on Sunday night.
The Sterling rose on Monday after the risks of further immediate political and economic upheaval receded.
The pound gained 0.3 per cent against the dollar to reach $1.1336 in morning trading in London and advanced 0.6 per cent against the euro to €1.1525.
Is the US heading for a recession?
Most economists now expect the world’s largest economy to tip into a recession in 2023 as job losses mount.
So far this year, monthly job growth has averaged 420,000 positions. Still a healthy clip, which is down from 562,000 a month in 2021.
Inflation, meanwhile, continues to run rampant with volatile items such as food and energy up to 6.6 per cent.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Consumer prices in the US rose more than expected last month in a sign that the inflation fight in the world's largest economy is far from over.
Inflation in the US is being closely watched as the US central bank's efforts to tame the problem push up the dollar and global borrowing costs.
The rate is well above the central bank's 2% target and means the Federal Reserve is likely to continue to keep raising interest rates in an attempt to combat the rising prices.
Inflation in the US has dropped back since hitting 9.1% in June, helped by a fall in fuel prices at the pump. This was also supported by costs for clothing and used cars dipping over the last month.
But the issue continues to affect other parts of the economy. Grocery prices have jumped 13% over the past 12 months, and housing and medical costs are also rising sharply.
Excluding food and energy, inflation has jumped by 6.6% - the fastest rate since 1982.
The Federal Reserve has already raised interest rates five times since March, opting for unusually large hikes in recent months that have unsettled financial markets and led to sharp slowdowns in sectors like housing.
By making borrowing more expensive, the Federal Reserve is hoping to reduce demand, especially for big ticket items such as cars and homes, and ease the pressures that are pushing up prices further.
But by slowing activity, this also risks tipping the economy into a recession. Analysts see that outcome as increasingly likely, since inflation has proven stubbornly resistant to the efforts introduced so far.
With midterm elections looming in November, President Joe Biden has tried to make the case that the slowdown in economic activity is a healthy shift from the growth surge that followed the pandemic, pointing to robust job creation and low unemployment.