Today marks the first day of March as we close the chapter on February. History has shown that February is on average the second worst month for equity returns. However, despite all the narratives we can currently think of, this February is turning out to be an anomaly. The S&P 500 and tech-heavy NASDAQ are up beyond 3%.
In the UK, house mortgage approvals have risen in January to 55,227. This was a surprise as it beat market expectation of 52,000 and signals the largest rise in approvals since October 2022. Recovery of the UK housing market is underway following the squeeze of higher restrictive policy environment over the past 2 years. The Bank of England (BoE) are expected to cut interest rates heading into Q2 2024, and mortgage rates will follow the trend. Rates on the two-year and five-year for mortgages have also continued to fall from their peak last July. The government’s latest proposal of a 99% mortgage scheme in an attempt to encourage first time buyers has also received mixed reviews.
Shein is a Chinese clothes retailor that has in recent years gained huge popularity through apps such as YouTube and TikTok. It was downloaded twice as many times as Amazon’s app over 2023 making it the world’s most popular shopping app. The reason we bring it up is because this week, UK Chancellor Hunt held talks with Shein in a push for the company to list on the London Stock Exchange. A listing the size of Shein’s would be a huge accomplishment for the UK, who have struggled to attract IPOs and retain promising companies who have listed in the US. Bloomberg have estimated the float could total up to $90billion!
US inflation figures were out on Thursday as the US Fed’s preferred measure of inflation, PCE, was announced. Headline PCE in January (year-on-year) fell to 2.4% from the previous 2.6% in December as Core PCE also fell to 2.8%, 10bps lower than December. The timing of the first interest rate cut by the US Fed remains uncertain and recent policymaker commentary have indicated they are in no rush to make that first cut.
Japan inflation figures were also released this week as headline inflation (year-on-year) was 2.2% in January, falling from 2.6% the previous month. This is the third consecutive month inflation has fallen and as core inflation hit the central banks target of 2%, the end of negative interest rates is a possibility in the following month of April. Energy costs falling has been a significant contributor to the slowdown as government subsidies assisted in curbing oil and gas bills. The challenge for the Bank of Japan (BoJ) will be to balance falling inflation but also tackle the two consecutive quarters of falling GDP alongside the weak Yen. Off the back of positive inflation figures, Japan’s Nikkei approaches the 40,000 level.
Next week is the March Budget as we eagerly await to see what measures will be announced. This event is largely regarded as Rishi Sunak and Chancellor Hunt’s last opportunity to sway the imminent election back towards the Conservatives.
Nathan Amaning, Investment Analyst
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