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Tech Triumphs, Coal Climbs, and China Chills
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Fed Up with Rate Cuts?
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Taiwan Feels the Heat from China
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Lufthansa and Airbus Soar Together
Market Recap.
Tech led the week, with the Nasdaq 100 ETF gaining 2.44%, followed by the S&P 500, which gained 1.36%. The industrials followed as the Dow Jones Industrial Average ETF added 0.74% and the FTSE 100 ETF gained 0.67% for the week.
At sector level, the Consumer Discretionary sector added 1.23% whilst the Energy sector fell by 3.28%, pointing to lower demand in the coming months.
News.
A jobs report pointing to a resilient U.S. labor market dampened hopes that the Federal Reserve would cut interest rates by early next year. The Labor Department’s report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000. The unemployment rate slipped to 3.7%, against expectations that it would remain steady at 3.9%. Bets that the Fed will deliver a rate cut in March eased to 46.7% after the report from 57.7%, according to the CME Group’s FedWatch tool.
Geopolitics.
Taiwan said on Friday that 12 Chinese fighter jets and a suspected weather balloon had crossed the Taiwan Strait’s sensitive median line, in a ratcheting up of tensions about a month before the island’s presidential election. Taiwan holds presidential and parliamentary polls on Jan. 13 and campaigning has kicked into high gear with how the next government handles relations with China.
Inflation.
Major companies in the energy and food sectors amplified inflation in 2022 by passing on greater cost increases than needed to protect margins, according to a new report. The Institute For Public Policy Research and Common Wealth said in a report that big firms made inflation “peak higher and remain more persistent,” particularly within the oil and gas, food production and commodities sectors. The author’s analysis of financial reports from 1,350 companies listed in the U.K., U.S., Germany, Brazil and South Africa found nominal profits were on average 30% higher at the end of 2022 than at the end of 2019. This does not necessarily mean that overall profit margins have risen, but it does mean that higher prices have been shouldered by consumers, the authors said.
Central Banks.
ECB President Christine Lagarde reiterated the European Central Banks commitment to returning to 2% inflation in a speech to students last week. She also stated that the ECB’s monetary policy strategy review has led to a more “symmetric and forward-looking inflation target, a more comprehensive assessment of price pressures and a stronger commitment to address the implications of climate change for monetary policy”.
Commodities.
Coal gained 10.19% last week as demand from China continues to rise, as temperatures are fall. China’s thermal coal imports for November are anticipated to reach approximately 29.21 million metric tons, surpassing October’s 24.62 million. Elsewhere, the oil contracts fell by almost 3% as slowing economic growth fed into demand.
ESG.
Lufthansa Group have announced an agreement with aerospace giant Airbus for the pre-purchase of 40,000 tons of carbon removal credits, to be delivered through the removal of CO2 from the atmosphere using Direct Air Capture (DAC) technology, as part of the Airbus Carbon Capture Offer (ACCO). The certificates, to be delivered over four years, will be available from 2026.
Week Ahead.
The key releases this week start on Tuesday when the US publishes its inflation figures with no change expected in the Year on Year number (4.00%).
The UK releases its GDP figure on Wednesday with 0.60% growth expected (Year on Year) versus 1.30% growth prior. On the same day, the US Federal Reserve makes its interest rate decision, with the rate expected to pause at 5.50%. The UK and EU follows suit on Thursday, with both expected to leave rates unchanged at 5.25% and 4.50% respectively.
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Sources:
Anthony Walters – Head of ESG 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 (quoted in Pounds Sterling).
News – Wall St dips as rate-cut bets ease after jobs data; energy caps losses By Amruta Khandekar and Shristi Achar A, Reuters, 08/12/23
Inflation – ‘Excess profits’ at big energy and consumer companies pushed up inflation, report claims, By Jenni Reid, CNBC, 08/12/23
Central Banks – Governance at a turning point, by Christine Lagarde, ecb.europa.eu, 04/12/2023
ESG – Lufthansa Joins Airbus Carbon Removal Program with 40,000 Ton Carbon Credit Purchase, by Susan Lahey, ESG Today, 07/12/23
Geopolitics – Chinese fighters, balloon cross Taiwan Strait a month before election, by Ben Blanchard, Reuters, 08/12/23
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.
Regulatory Information:
This is a general communication provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Marlborough or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine – together with their own professional advisers if appropriate – if any investment mentioned herein is believed to be suitable. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice.
All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Issued by Marlborough Investment Management Limited, authorised and regulated by the Financial Conduct Authority (reference number 115231). Registered office: PO BOX 1852 Lichfield, Staffordshire, England, WS13 8XU. Registered in England No. 01947598. The Clever Marlborough Model Portfolio Service (‘Clever MPS’) is a collaboration between Marlborough Investment Management Limited as the Discretionary Fund Manager and Clever Adviser Technology Limited, a company registered in England and Wales (company number 2910523) with registered office at Watergate House, 85 Watergate Street, Chester, Cheshire CH1 2LF (“Clever”). Clever is a technology and software provision company which developed a methodology and proprietary suite of algorithms for the monitoring, analysis, collation, and transmission of data on the performance of Investment Funds and related portfolios within the UK market which Marlborough utilises for investment purposes.
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