Last week was a buoyant one for Japanese equities where local indices reached their highest in nearly thirty-four years. The Nikkei 225 jumped by +6.5% (+6.1% in GBP) to build on the impressive strides made during 2023. Underpinning last week’s moves was a growing optimism that the Bank of Japan (BoJ) will persist with its highly accommodative policy stance following the publication of subdued wage and inflation data. Wages in real terms declined for a twentieth consecutive month during November[1] whilst inflation figures covering the Tokyo metropolitan area slowed again during December[2]. The data reduces some of the heat on the BoJ to tighten its monetary policy with the existing policy environment highly supportive for local equities.
Elsewhere, US equities advanced despite a higher-than-expected headline CPI print. The S&P 500 rose by +1.8% (+1.8% in GBP) with several of the tech giants including Meta Platforms and NVIDIA performing well. In Europe, the MSCI Europe ex UK index edged +0.2% higher (flat in GBP) in what was a largely uneventful week from a market perspective. That was despite European Central Bank (ECB) President Christine Lagarde signaling that interest rates have likely peaked on the Continent with the worst of inflation hopefully now in the rear-view mirror. Across the Channel, the FTSE 100 and FTSE 250 declined by -0.8% and -0.1% respectively. Chinese equities also retreated with the -1.6% (-1.8% in GBP) fall a second consecutive weekly decline. Cautiousness ahead of Taiwan’s General Election and retaliatory sanctions by Beijing on several US defense companies likely weighed on sentiment[3].
Moving to commodities, oil prices spiked on Friday following joint UK and US air strikes on Houthi targets in Yemen in response to a series of ship attacks across the Red Sea. Brent Crude jumped by +4.0% during Friday’s morning trading, briefly exceeding $80.00 a barrel before settling at $78.72, a weekly decline of -0.4%. Elsewhere, copper prices trended lower with the metal falling by -1.4% to $8,241 a tonne on subdued global demand expectations.
Week Ahead
| Day | Country | Measure | Period | Forecast | Previous |
| Monday | Europe | Industrial Production MoM | November | -0.30% | -0.70% |
| Tuesday | UK | Average Earnings (ex Bonus) YoY | November | 6.80% | 7.20% |
| UK | Unemployment Rate | November | 4.30% | 4.20% | |
| Wednesday | China | GDP YoY | Q4'23 | - | 4.90% |
| China | Industrial Production YoY | December | - | 6.60% | |
| China | Retail Sales YoY | December | - | 10.10% | |
| China | Urban Unemployment Rate | December | - | 5.00% | |
| Europe | Final CPI Inflation YoY | December | 2.90% | 2.90% | |
| UK | CPI Inflation YoY | December | 3.80% | 3.90% | |
| US | Industrial Production MoM | December | 0.00% | 0.20% | |
| US | Retail Sales MoM | December | 0.30% | 0.30% | |
| Thursday | Japan | Core CPI Inflation Nationwide YoY | December | 2.30% | 2.50% |
| US | Building Permits | December | 1.478m | 1.467m | |
| US | Housing Starts | December | 1.450m | 1.560m | |
| Friday | UK | Retail Sales MoM | December | -0.50% | 1.30% |
| US | Existing Home Sales | December | 3.830m | 3.820m | |
| US | University of Michigan Consumer Sentiment | January | 69.00 | 69.70 |
Source: Refinitiv Workspace, 15/01/24
[1] Ministry of Health, Labour & Welfare of Japan – Monthly Labour Survey, November 2023
[2] Statistics Bureau of Japan – CPI Ku-area of Japan, December 2023
[3] T. Rowe Price – Global Markets Weekly Update, 12/01/24
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