City thinking, local knowledge

January Commentary 2024

By Questa Chartered

January Market Summary 2024

In our first commentary of the New Year, signs of relief in the global inflation crisis are emerging. But economic growth remains sluggish in many vital markets, raising questions about the road ahead. Let’s take a closer look at the key markets worldwide in our January commentary 2024.

United Kingdom

The UK economy faced a 0.3% contraction in October 2023, showing challenges in sustaining growth. Although inflation slowed to 3.9% in November, it’s still above the Bank of England’s 2% target. High interest rates persist, with the Bank maintaining a 5.25% rate. Wage growth at 7.3% means rate cuts aren’t likely soon.

While the housing market shows some promise, cost-conscious consumers are turning to cash transactions amidst high inflation.

In January 2024, mortgage lenders started the year by cutting rates, taking some of the pain out of the cost of a new deal for homeowners. The UK’s biggest lender, the Halifax, has cut some interest rates by close to one percentage point, with brokers now expecting others to follow suit.

Business-wise, scrutiny of Microsoft’s partnership with OpenAI continues, while financial service reforms face scepticism. The UK benefits from a new financial deal with Switzerland, and the post-Brexit relationship with the EU appears to be stabilising.

Europe

Europe grapples with slow growth as GDP fell by 0.1% in the eurozone in Q3 2023. Spain and Italy show modest growth, but Germany’s economic output contracted by 0.1%. Inflation is closer to the central bank’s target at 2.4%, leading to a stable 4% interest rate. Trade agreements with Kenya and developments in Eastern Europe aim to strengthen economic ties.

United States

Goldman Sachs has revealed that the US economy is on track to avoid recession in 2024, with GDP predicted to grow by 2.1%, exceeding expectations. High inflation concerns appear to be easing, with retail sales bouncing back in November. Employment numbers are also encouraging, with 199,000 jobs added in November, bringing the jobless rate down to 3.7%. Trade disputes and mergers in the car and steel industries are on the horizon.

Far East

China faces concerns over its rising debt, prompting Moody’s to downgrade its government debt outlook. Italy’s withdrawal from the Belt and Road Initiative impacts China’s global projects. Ongoing tensions between China and the US persist, although diplomatic efforts continue. Japan’s economy contracted in Q3 2023, but business sentiment is improving. High inflation remains a challenge.

Emerging Markets

India shines as a star performer, with strong economic growth predicted due to infrastructure projects and stability. However, rising inflation warrants attention. Brazil expects slower growth in 2024 but benefits from falling interest rates. Sanction-hit Russia still reports robust economic figures, albeit dependent on war expenditures. International sanctions continue, but some Russian businesses remain resilient.

Financial Markets

On the financial front, indices fluctuate. In the UK, the FTSE-100 index ends at 7,733 points, while in Europe, the DAX and CAC 40 indices show modest gains. In the US, the Dow Jones and S&P 500 indices finish the month with healthy increases.

In the Far East, Hong Kong’s Hang Seng index rises, while Japan’s Nikkei index remains stable. In emerging markets, India’s BSE Sensex gains significantly, Brazil’s Bovespa index rises, and Russia’s MOEX index fluctuates amid ongoing sanctions.

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