Week ending 02/08/24 – Market Rotation, Correction or Worse?
This week has seen a flurry of macro data, giving Jeremy and Gareth plenty to discuss.
European growth is slowing (the German economy is in decline) but inflation is nudging upwards - not a good combination. Elsewhere, we saw one rate rise, one rate reduction and a "wait and see". Japan saw rates rise, just as US rates were signposted likely to be reduced in future months (possibly September) - this could lead to significant volatility - the Yen has soared and Japanese stocks plummeted (6%). The reduction in the UK was partly expected, but clearly good news - and markets price in another 1% or even 1.5% of reductions in the coming quarters.
US market volatility continues, with Nvidia yo-yoing in a way that a mega-cap stock perhaps should not - all on the back of confusion over AI spend and adoption. But the bigger US (and global) issue is the "freight train" of debt - and Jeremy explains that some sneaky short-term arrangements being used in the US could lead to a major and dangerous combination of refinancing needed just as the Federal debt ceiling is being renegotiated very early in 2025 - tricky at the best of times, but if the US election is still being contested, the outcome could be severe indeed.
Closer to home, Progressive stocks with news included Van Elle, Xaar, Severfield, Forterra and Watkin Jones - with the "light at the end of the tunnel" sentiment common to these groups also echoed by FDM Group. Rathbone is seeing more-positive investor sentiment.
Next week there's US PMI data due, as well as some trade and inflation figures to come from China. Other than that, we're expecting a fairly quiet week.
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