After a poor start to the week in markets there was a welcome rally towards the end of the week. There was positive news specifically around job creation in the UK, with the approval of the Rosebank offshore development. Rosebank is in the northernmost region of the UK and is currently the most untapped oil field, estimated to contain 300m barrels of oil. Development of this is set to create approximately 1,600 jobs but most importantly for the UK government, will reduce the overreliance on external supply.
Staying on the environmental path, the UK has seemingly lost its “Climate Crown” as earlier this week, Prime Minister Rishi Sunak, pushed back several climate change targets from 2030 to 2050. The most prominent was the pushback on the sale of petrol and diesel cars. Sunak claimed he remained “committed” to the legally binding target of 2050 and announced the UK could afford to make slower progress due to being “so far ahead of every other country in the world”.
US data points are the most anticipated releases, and it can be quite tough to predict how markets will react. On Thursday we saw US GDP for Q2 come in as expected at 2.1%. The economy remains resilient as Q1 data was revised at 2.2%, this can be seen as ammunition for the US Fed to keep rates “higher for longer”. Initial jobless claims came in at 204,000, lower than the expected 215,000 as the US labour market remains resilient. Strangely enough we saw huge moves in the bonds markets this week before the data releases as yields rose further Wednesday with the US 10-year yield reaching 16-year highs.
Amazon has now played their hand in the Artificial Intelligence (AI) space as this week they announced investment of up to $4bn in a high-profile start up, Anthropic. Anthropic is an AI research and development company and amazon is hoping this investment can be their biggest challenge to Nvidia and Microsoft who have led the way in developing AI. Amazon customers and employees are set to gain early access to Anthropic features such as customising their AI when using the service.
German inflation well and truly may have seen its peak as it fell to 4.5% (year-on-year) for the month of September. This is a significant fall since the 6.1% reading in August and is the lowest level of inflation since Russia invaded Ukraine. While falling inflation rates is pleasing, the effects of rising interest rates within the country is still yet to be fully felt, and investment and consumption is already slowing. We have recently seen downgrades for German GDP for 2023, reflecting the recent slowdown in the economy.
As an investment team here at Raymond James Barbican, we maintain our key message of diversification within portfolios and long-term investment opportunities. Bond market volatility has picked up this week, showing the importance of considering a wide range of equity diversifiers, including cash and alternative assets. That being said we continue to identify considerable opportunities in the bond market space; short term commotion can certainly create opportunities in the long run.
Nathan Amaning, Investment Analyst
Risk warning: With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.