An eventful week comes to a close

An eventful week comes to an end. In summary, the US banks delivered some strong earnings reports, setting a promising start to the earnings season. BNY, Wells Fargo, Citi, and JP Morgan share prices had decent rises after their numbers. Next week, we will start to get a broader range of industry reports, which may give us better insight. We also had the monthly US inflation data, which the market seemed pretty relaxed about despite the headline rate of 2.9%, remaining well ahead of the Fed’s 2% target. Investors focussed that the rate of price rises was falling and that pressure was a bit milder. A combination of both led to a sharp rally in stock markets, particularly the US ones, on Wednesday. Equities were probably also somewhat helped by a modest US bond market rally over the past week. US markets have not had a great time since mid-December; the Trump rally in early November has been chiefly eaten away in both the S&P and the smaller Russell 2000. There is a case for saying Wednesday’s rush was an old-fashioned dead cat bounce, and Thursday’s failure for the S&P 500 to follow through adds weight to that view. The economic reports over the past 7 days are unlikely to move the Fed to change its expected interest rate path.

The UK economy grew by 0.1% in November, slightly below expectations of 0.2% but at least on the right side of the mark. Year over year, the UK economy grew by 1%, below expectations. Industrial and Manufacturing data also came in below expectations. The latest retailsales data out this morning again missed expectations. Despite all that, one could probably argue that, on balance, it’s been a slightly better week for Ms Reeves than some others she has had.

Later today, we get the IMF’s thoughts on the economic outlook. There was some headline good news, at least out of Asia, as China’s economy reported growth of 5.4% in the 4^th quarter of 2023, beating estimates of 5% and ahead of the 4.6% in the third quarter. This news looks like it’s helping the European stock market open on a slightly positive note, along with the news that an agreement to pause the war in Gaza has been finalised, according to a statement from Benjamin Netanyahu. I’m not sure the IMF will deliver any meaningful insights for the year ahead. They will continue to expect the US to grow modestly and the rest of the world to struggle a bit more. I doubt they will change their expectations for the year ahead: steady growth, inflation coming down and a gentle monetary policy easing. They currently forecast the global economy to grow at 3.2% in 2025, which is unlikely to change by much, if anything. They will also give themselves a few caveats, with interest rates and geopolitical uncertainty being the favourites.