The World In A Week – More Pay, Less Work

Written by Dominic Williams

Wage growth in the UK remained persistently strong, with the annual rate of pay growth in average weekly wages, excluding bonuses, unchanged at 6% in the three months through March, slightly higher than the forecast of 5.9%. However, the job market showed signs of softening, with vacancies continuing to fall, unemployment rising and the number of people claiming benefits increasing slightly. These mixed signals are unlikely to resolve the debate among members of the Monetary Policy Committee (MPC), at the Bank of England, regarding interest rates, although traders have slightly increased the probability of a June rate cut to just over 50%. Before the June decision, the members of the MPC will have two additional inflation reports to consider, alongside the mixed labour data. The Consumer Price Index (CPI) is set to be released on Wednesday, with forecasters anticipating a large decrease to 2.1% from April’s 3.2%.

Annual inflation in the US eased in April to 3.4% from 3.5% in March, in line with forecasts. This data ended a four-month streak of inflation exceeding expectations. The news came a day after the Federal Reserve (the Fed) Chair, Jay Powell, warned that the central bank may need to maintain higher rates for longer. Despite this, traders in the futures market priced in the possibility of the Fed reducing interest rates twice in 2024. Following the data release, the S&P 500 Index climbed, hitting a record high before finishing the week in positive territory, up +0.1% in GBP terms.

At the end of the week, the central government in China unveiled a historic rescue package to stabilise the country’s struggling property sector. The People’s Bank of China (PBOC) lowered the minimum deposit ratio to 15% for first-time buyers and to 25% for second-home purchasers, in addition to reducing mortgage rates by 0.25%. The PBOC also scrapped the nationwide floor level of mortgage rates, allowing cities to set their own rates. Additionally, the PBOC provided RMB 300 billion ($41.5 billion) worth of loans to local governments to directly purchase unsold apartments.

There have been mixed signals regarding the state of China’s economy. China’s industrial production expanded year-on-year by 6.7% in April, exceeding market forecasts of 5.5% and significantly improving from the 4.5% gain recorded the previous month. In contrast, retail sales rose by 2.3% year-on-year in April, missing market forecasts of 3.8%. Nevertheless, markets remained positive, with the MSCI China Index finishing the week up +2.7% in GBP terms.

The mixed signals emerging from China underscore the significance of maintaining a diversified portfolio. While we do not directly hold individual Chinese equity funds in our asset allocation, our exposure to the region is attained through our Global Emerging Markets equity funds, which form a component of our broader diversified portfolio.


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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 20th May 2024.

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