Thursday saw choppy trading following the release of the December consumer price index (CPI) print which came in slightly hotter-than-expected, whereas core inflation was in line with consensus estimates. The following session, producer price data was more encouraging in which headline wholesale prices saw their third consecutive monthly decline.
For the week the Nasdaq led gains, rising 3.1% as tech names outperformed. The Dow Jones was up 0.3% while the S&P 500 climbed 1.8%. Oil prices climbed on Friday amid rising tensions in the Red Sea region where the US and UK had launched strikes against Houthi rebels. This somewhat offset losses earlier in the week after a surprise jump in US crude stockpiles, although prices were ultimately lower. Bank stocks were mostly lower after major lenders reported earnings on Friday. JPMorgan Chase was down slightly on the session even after posting record net profits for 2023. Airlines also experienced pressure after Delta Air Lines cut its 2024 earnings forecast. Treasury yields had a muted reaction to the CPI data and ended the week slightly lower, with the 10-year yield back below 4%.
The pan-European STOXX 600 ended the week just a fraction above the flatline while regional performance was more mixed. Amongst gainers were German, French and Italian indices while the UK FTSE 100 was down 0.8%. For most of the week the mood was dampened by concerns that rates may stay higher for longer. However European markets received a boost as European Central Bank President Christine Lagarde commented that, regarding inflation, the “hardest and worst bit” was likely over. This raised expectations of rate cuts from the central bank although ECB Chief Economist Philip Lane tried to temper expectations stating that rate cuts were not a near-term topic.
Japanese markets were the standout performer of the week, seeing notable rises. The Nikkei 225 was up 6.6%, breaching the 35,000 mark to hit its highest level since 1990. Equities were supported by ongoing weakness in the yen, particularly after the hotter-than-expected US inflation reading. In addition, the case for the continuation of the Bank of Japan’s stimulative monetary policy appeared to strengthen, with the Tokyo core consumer price index seeing its slowest annual climb since June 2022.
Chinese equities continued to lag against a backdrop of mixed economic data. The Shanghai Composite retreated 1.6% and the Hang Seng fell 1.8%. China’s CPI dropped 0.3% year-on-year in December in its third consecutive month in deflationary territory, while the producer price index logged its fifteenth monthly drop, falling 2.7%. Meanwhile exports rose more than expected, however it saw its first annual decline in seven years.
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This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.