All eyes were firmly on the US inflationary picture last week with the latest CPI data published on Thursday. Whilst the headline index did decline during January, the 3.1% figure exceeded market forecasts by 30 basis points (bps)[1], reflective of higher housing and food costs. The data likely extends the timeline for when the first Federal Reserve (Fed) rate cut will be implemented with treasury yields rising to reflect that narrative. In local equity markets, the S&P 500 declined by -0.4% in dollar terms having reached a record high a week earlier whilst the NASDAQ retreated by -1.3%. In what has become a rare occurrence in recent months, value shares outperformed whilst small-caps also enjoyed a solid week.

Elsewhere, it was a largely positive week for equity markets with the Nikkei in Japan rising by +4.3% in local currency. Weakness in the Yen alongside a series of strong company results helped underpin another strong week of returns. As for China, mainland markets were closed due to the Lunar New Year celebrations which took part throughout the week. In Europe, positive returns were seen across most equity markets with the MSCI Europe ex UK index posting a weekly gain of +1.3% in euro terms. The FTSE 100 and FTSE 250 rose by +1.8% and +0.7% respectively with lower than forecast inflation underpinning some welcome positive momentum. Confirmation that the UK economy did slip into recession during the final quarter of 2023[2] did little to dent sentiment given a weak economic picture increases the likelihood of dovish activity by the Bank of England (BoE).

Moving to commodities, oil prices gained as tensions across the Middle East remained at the forefront of trader’s thoughts. Brent Crude rose by +1.8% to $83.20 a barrel as rocket attacks along the Israel-Lebanon border added to fears of an escalation of the ongoing conflict in the region. Amongst the metals, copper bounced by +4.3% despite the US inflation miss whilst gold edged

Week Ahead

Source: Refinitiv Workspace, 19/02/24

[1] Bureau of Labor Statistics – Consumer Price Index Summary January 2024

[2] ONS – Q4’23 GDP Estimate

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