In what has become a somewhat rare occurrence recently, Chinese equities concluded last week in positive territory. The Shanghai Composite advanced by +2.8% in local currency terms with the Hang Seng faring even better (+4.2%) after the People’s Bank of China (PBOC) announced a cut in the amount of cash that domestic banks must hold in reserve[1]. The goal is to hopefully boost the amount of lending available to both businesses and consumers to try and stimulate an improvement in the country’s economic recovery. Whilst the announcement was clearly welcomed by the Market, the news over the weekend that property giant Evergrande has been ordered to liquidate by a Hong Kong court reiterates just how fragile the Chinese financial landscape is right now.

Elsewhere, US equities continued their upwards march with the S&P 500 hitting record levels once again thanks to a +1.1% weekly gain (local currency). In Europe, a somewhat more dovish tone from the European Central Bank (ECB) helped lift local equities, the MSCI Europe ex UK index posting advance of +3.2% (local currency). ECB President Christine Lagarde noted the process of bringing inflation down was working although it remains premature to consider rate cuts for the time being. One country that saw negative momentum last week was Japan where the Nikkei 225 retreated by -0.6% (local currency). That was despite the Bank of Japan (BoJ) reiterating its commitment to its highly accommodative policy stance on Tuesday.

In other news, oil prices rose for a second straight week with support coming from strong economic growth data in the US, the Chinese stimulus announcement and ongoing nervousness around Middle Eastern tensions. Brent crude rallied by +3.6% to $81.95 a barrel to reach its highest level for nearly two months. Copper was an additional beneficiary of the PBOC’s policy shift with the metal jumping by +2.1% to $8,448 on hopes of increased construction activity in China.

Week Ahead

Source: Refinitiv Workspace, 29/01/24

[1] T. Rowe Price – Global Markets Weekly Update 26/01/24

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