Written by Ilaria Massei

The past week was relatively light in terms of data released. Equities returned to positive territory, with the MSCI All Country World Index of global shares gaining +2.4% in GBP terms, and China emerged as a big winner, with the MSCI China Index gaining +8.0% in GBP terms. Global Treasuries have remained under downward pressure, with longer-dated Treasuries being the most affected within the Fixed Income asset class, given their higher interest rate sensitivity.

The most notable surprise came from the U.S, where the Q1 GDP Growth rate unexpectedly fell short, coming in at 1.6%, instead of the anticipated 2.5%. It’s crucial to emphasise that such data points are often volatile and subject to revisions. Conversely, the U.S core Price Consumption Expenditure (PCE) Index, which is a measure of consumer spending on goods and services excluding food and energy, surged to an annualised rate of 3.7% in 1Q24 from 2.0% in 4Q23, confirming concerns that escalating services inflation might further postpone Fed rate cuts. When we look deeper into the data however, we can see that items like “portfolio management costs”, which are simply a reflection of the strength of the S&P 500, drove all of the upside inflation surprise. It is unlikely that these elements will persist.

Chinese equities saw their strongest weekly performance since December 2022, with the MSCI China Index rising by +8.0% for the week, taking the index return to +6.9% in GBP terms year-to-date. This rebound was supported by better-than-expected macroeconomic performance in the first quarter and an upward adjustment of the consensus forecast for 2024 real GDP growth.

Recent developments in Japan, particularly following last week’s Bank of Japan (BoJ) policy meeting, have captured investors’ attention as the Yen faced renewed downward pressure. The substantial interest rate differential between the US and Japan continues to weigh on the currency. Despite discussions of potential currency intervention by the BoJ, no action has been taken thus far.

Lots of different economic and market cycles appear to be playing out globally, making the case for a strong element of geographic diversification in client’s portfolios.

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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 29^th March 2024.

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