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Market Snapshot - January 2024

5 months ago

The Markets


Global equities were mixed in January, with the MSCI World Index rising 1.2%. Japanese stocks were the strongest performers, boosted by robust corporate earnings and a weaker yen (TOPIX +7.8%). US equities also gained (S&P 500 +1.7%), helped by a continued advance from stocks seen to benefit from the growing use of artificial intelligence. European shares also moved higher (MSCI Europe +1.6%). However, emerging market equities retreated (MSCI EM -4.6%), weighed down by weak returns in China (MSCI China -10.5%).



Global bonds weakened as hopes faded that rates may be cut as soon as March, given a re-acceleration in headline inflation rates and a stronger-than-expected start to 2024 for most economies. The yield on the 10 year US Treasury bond rose 7 basis points (bps) to 3.95% while the yield on the 10 year German Bund increased 18 bps to 2.18%. Corporate bonds held up better than government debt, with high yield outperforming investment grade bonds.



The US dollar appreciated over January, as the Fed took pains to emphasise it was in no rush to cut interest rates. While the euro weakened against the dollar, it strengthened against the Japanese yen. The Bank of Japan signalled that rising wages meant a 2% inflation rate was becoming more sustainable, but signalled it was in no rush to end its ultra-accommodative stance.



Oil prices rallied on concerns over disrupted supply given heightened tensions in the Red Sea and fears that the Israel/Hamas conflict could spread across the wider region. Brent crude closed the month +2.8% at $80.53 a barrel. Gold prices eased slightly over the month, but remained above $2,000 a troy ounce.

Market Volatility

Market volatility

Volatility rallied 15.3% in January, with the Vix Index closing at 14.4. However, the index remained below the 20 level which is usually viewed to be an indicator of market stability.

Responsible investing

Responsible investing

Morningstar reported that, for the first time on record, global sustainable funds experienced net quarterly outflows in the final three months of 2023, primarily due to significant outflows from US funds. In contrast, European sustainable funds continued to see inflows.

In brief

  • Central banks warned that financial markets might have become overly optimistic about the probability of rate cuts in the first quarter of this year, after headline inflation rates accelerated modestly in December followed by early indicators of economic activity strengthening in January.
  • The Federal Reserve (Fed) kept rates on hold during its meeting on the last day of January. US policymakers indicated that they do not expect to reduce rates until they have gained greater confidence that inflation has moved sustainably toward 2%.
  • The European Central Bank (ECB) also voted to leave borrowing costs unchanged. ECB president Christine Lagarde acknowledged that the worst of the inflation fight was likely over and the “disinflation process was at work” but signalled that summer was the most probable timing for rate cuts.

On the radar

  • The attacks by Houthi rebels in the Red Sea have caused many companies to shun using the Suez Canal in favour of the longer route around Africa. Shipping costs and delivery times are expected to rise as a result, bringing an eventual impact on inflation data.
  • Headline inflation rates ticked up in December, but early indications of inflation for January show the downward trend has resumed. Eurozone inflation slowed to 2.8% in January from 2.9% in December, although the slowdown was less significant than analysts had expected.
  • China’s GDP grew 5.2% in 2023, the weakest year for the economy since 1990, excluding the pandemic year. The Chinese authorities continue to promise support but such measures have so far underwhelmed. Nonetheless, the central bank is expected to reduce rates further. 

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