Written by Anthony Walters – Clever‘s Head of ESG & Christos Chountoulesis our Investment Analyst, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
The Dow Jones Industrial Average ETF gained 0.58% this week (1.66% YTD). By contrast, the S&P 500 ETF fell by -0.38% (12.36% YTD), the Nasdaq 100 ETF contracted by -0.78% (34.43% YTD) and the FTSE 100 ETF shrank by -1.57% (3.82% YTD).
US inflation data next week could point towards the UK and US economies position and interest rates trajectory, after a week of pressure following the downgrade in US credit rating and the surge in Treasury yields.
News.
The US government’s credit rating has been downgraded following concerns over the country’s finances and debt burden. Ratings agency Fitch cut the rating from the top level of AAA to a notch lower at AA+. Fitch said it had noted a “steady deterioration” in governance over the last 20 years. US Treasury Secretary Janet Yellen called the downgrade “arbitrary” and based on “outdated data” from the period 2018 to 2020, she said.
Geopolitics.
Chinese Special Envoy for Eurasian Affairs Li Hui will visit Jeddah for international talks on the peaceful settlement of the Ukraine crisis, China’s foreign ministry said on Friday. “China is willing to work with the international community to continue to play a constructive role in promoting a political solution to the crisis in Ukraine,” Wang Wenbin, a spokesperson at the Chinese ministry, said in a statement.
Inflation.
Underlying inflation in the euro zone has probably peaked, pointing to slower growth in other prices too, the European Central Bank said on Friday. “Median and mean underlying inflation measures suggest that underlying inflation likely peaked in the first half of 2023,” the ECB said in an article. The ECB officially targets headline inflation to meet its 2% objective.
Central Banks.
The Bank of America has predicted one more rate hike from the Bank of England (BOE) and European Central Bank (ECB), with no cuts expected until February 2025 and June 2024, respectively. In a research note, BofA analysts suggested that the BOE prefers a policy of holding at a terminal rate for longer to hiking more and cutting sooner. BofA cited resilient GDP dynamics and a positive labour market as reason for an ECB increase.
Commodities.
Heating Oil (2.36%), WTI Crude Oil (1.13%) and Brent Crude Oil (0.93%) all made gains this week, as Saudi Arabia announced a further one-month extension of its 1 million barrels per day production cut. By contrast, all metals fell following the downgrade of the US sovereign debt rating and the strengthening of the dollar, with Silver (-5.45%) and Copper (-3.82%) falling the most this week.
ESG.
Energy giant BP announced today an investment of £4 million (USD$5 million) in fleet decarbonization solutions startup Dynamon, alongside an agreement to collaborate with the company on optimizing EV fleets and developing a premium offer for customers. Dynamon provides fleet management solutions for fleets, OEMs, charging infrastructure providers, vehicle leasing operators and telematics companies, aimed at accelerating the transition to electric vehicles, reducing operational costs and improving fleet efficiency.
Week Ahead.
The key events this week include the US reporting its inflation figures on Thursday (3.0% prior), whilst the UK reports its GDP figures on Friday. Both central banks and market participants will be watching closely, as each report ultimately gives guidance to policymakers on monetary policy in the coming months.
Sources.
Anthony Walters – Head of ESG, Christos Chountoulesis – Investment Analyst at Clever Adviser Technology Ltd (Clever)
Market recap – Data sourced from FE FundInfo & Koyfin. ETFs quoted: iShares Core FTSE 100 UCITS ETF, iShares Core S&P 500 UCITS ETF, iShares Nasdaq 100 UCITS ETF. YTD (year-to-date figures quoted in Pounds Sterling).
News – As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy, by Tim Kelly, Karen Freifeld and Kentaro Sugiyama, Reuters, 24/07/23
Inflation – European stocks gain after U.K. CPI grows more slowly than expected by Peter Nurse, Investing.com 19/07/23
Central Banks – A ‘momentous week’ ahead as the Fed, ECB and Bank of Japan near pivot point, by Elliot Smith, CNBC, 24/07/23
ESG – Virgin Atlantic Plans First-Ever 100% Sustainable Aviation Fuel-Powered Transatlantic Flight this Year, by Mark Segal, ESG Today, 20/07/23
Geopolitics – Ukraine war: Wheat prices soar after Russia threatens ships, by Emily McGarvey, 21/07/23
Commodities – Data sourced from Koyfin and Investing.com
Week ahead – Data sourced from Investing.com
Risk Warning: These are Anthony’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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