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US Markets Soar on Falling Inflation
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UK Economy Stalls Amid Wet Weather Woes
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Federal Reserve Holds Rates, Plans Single Cut in 2024
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Energy Commodities Surge, Cotton Dips on Supply Outlook
Market Recap.
As US inflation fell, the US markets made big gains as the Nasdaq 100 ETF (+3.23%) and S&P 500 ETF (+1.70%) showed. The Dow Jones ETF (-0.20%) was muted and the FTSE 100 ETF fell (-0.94%) as traders saw greater upside in more richly priced markets.
News.
The UK economy failed to grow in April after particularly wet weather put off shoppers and slowed down construction. The official data is what most economists had expected and comes after the fastest growth in two years from January to March, ending the recession from the final half of last year.
The economy is a key battleground in the run-up to the general election on 4th July, with the main parties debating whether the latest numbers point to a continued recovery or stagnation.
Geopolitics.
Russian President Vladimir Putin will visit Hanoi this week, highlighting Communist-ruled Vietnam’s loyalty to Russia and triggering a U.S. rebuke. The visit follows Hanoi avoiding a Ukraine peace summit in Switzerland last weekend, while sending its deputy foreign minister to a BRICS meeting in Russia earlier last week.
The United States, which upgraded relations with Hanoi last year and is Vietnam’s top trading partner, reacted harshly. “No country should give Putin a platform to promote his war of aggression and otherwise allow him to normalise his atrocities,” a spokesperson for the U.S. embassy in Hanoi said.
Inflation.
US consumer price inflation (CPI) came in lower than expected in May at 3.30%, raising hopes for an early interest rate cut by the Federal Reserve.
This was lower than the flatline growth economists had predicted. Meanwhile, core inflation, which excludes volatile prices for food and energy, sat at 3.40%, also slightly below the expected 3.50%.
Central Banks.
The Federal Reserve held interest rates steady at their current range of 5.25% to 5.50%, but revised its outlook for rate cuts to just one in 2024. Central bank policymakers noted that there has been “modest further progress” toward its 2.00% inflation objective. Federal Reserve Chair Jerome Powell noted at the press conference that the central bank does not yet have the confidence to cut rates, even as inflation has eased from its peak levels.
Commodities.
The Energy contracts led for the week with Ethanol (+4.77%), Heating Oil (+2.28%) and Brent Crude Oil (+1.41%) out in front as markets gained optimism that the economy would grow thanks to pending rate cuts. The latest EIA report indicated a drop of 656 thousand barrels in heating oil inventories, reversing the previous week’s build.
Cotton fell by 4.42% reflecting a higher supply outlook. In 2024, there was a significant uptick in cotton planting in the US, with an expected 500,000 acres allocated to cultivation, up from 390,000 acres for 2023.
ESG.
Australia-based telecommunications and information services company Telstra has announced that it will no longer be using carbon credits to offset its operational carbon emissions. Instead it will shift to investments in decarbonisation projects to reduce its direct emissions footprint.
In addition to moving away from offsetting, Telstra also announced an increase in its decarbonization goals, raising its scope 1 and 2 carbon emission reduction target to 70% by 2030, from its prior 50% goal, while keeping its 2030 target to reduce Scope 3 emissions by 50% in place.
Week Ahead.
The EU announces its inflation figures on Tuesday, with year-on-year CPI (Consumer Price Index) expected to increase from 2.40% to 2.60%. It’s the turn of the UK on Wednesday, with UK inflation expected to decrease to 2.00% from 2.30%.
On Thursday the Bank of England will announce its interest rate decision with the market expecting rates to be held at 5.25%. And on Friday, the US Federal Reserve will publish its Monetary Policy report, to guide markets on it’s latest train of thought.
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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 UK economy fails to grow during wet April, by Mitchell Labiak and Andy Verity, BBC News, 12/06/24
Inflation US inflation falls to 3.3% in May, by Linus Uhlig, 12/06/2024
Central Banks Fed recap: Chair Powell explains why the central bank isn’t ready yet to cut rates, by Darla Mercado, CNBC, 12/06/2024
ESG Telstra Ends Use of Carbon Credits to Increase Focus on Decarboniation Projects, by Mark Segal, ESG Today, 14/06/24
Geopolitics Russia’s Putin to visit Vietnam, sparking US rebuke of Hanoi, By Francesco Guarascio and Khanh Vu, Reuters, 17/06/24
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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