Market Update - May 2024

Over the past few months, we have observed that while economic growth is slow in many parts of the world, the worst?of the?inflation crisis?seems to have?passed.?The International Monetary Fund has stated that the global economy has been remarkably resilient?in recent years. Despite gloomy predictions, the world avoided a recession; the banking system proved largely resilient and?major?emerging market economies did not suffer sudden stops.?However, the global economy?is not yet?where investors, businesses, consumers, and policymakers want it to be.?Let’s take a closer look at the key markets around the world and examine their current state over the last month.?

United Kingdom The UK economy grew by 0.1% in February, indicating a recovery from a recession. Inflation fell to 3.2%, but the unemployment rate rose to 4.2%. Many UK businesses are struggling due to new post-Brexit UK border controls that could raise import costs by 10%, causing prices to increase.?Premier Inn owner Whitbread is cutting 1,500 jobs and reducing its number of branded restaurants.

Meanwhile, Lloyds Banking Group reported that pre-tax profits fell to ￡1.6bn in the first quarter of 2024. HSBC’s Group Chief Executive Noel Quinn announced his retirement after HSBC experienced a 1.8% drop in profit.??

Energy giant Shell is leaving London to list in New York due to more positive attitudes towards fossil fuels among US investors. Microsoft opened a new London office focused on AI research and development. The UK’s Competition and Markets Authority has raised concerns about the monopoly of big tech companies in the AI industry.?

In April, the pound decreased by 0.29% against the dollar, while the FTSE-100 Index closed the month at 8,159 points, marking a 2.60% increase from the previous month. March.?

Europe The eurozone is expected to see growth in the coming years, with inflation declining. The ECB has decided to maintain interest rates at 4.5% and is committed to ensuring inflation returns to its 2% target.??

Germany’s economy is improving and it’s become one of the most attractive places to do business. France’s?businesses?are becoming more confident about its economic prospects, but concerns remain about its public debt. The automotive sector’s performance has?been mixed.??Ireland has elected Simon Harris as Taoiseach, and Spain’s Prime Minister Pedro Sánchez vows to remain in power despite corruption claims.?On the financial markets,?Germany’s DAX index and the French CAC 40 index?both?fell in April.?

United States The US experienced a slowdown in economic growth in the first quarter of 2024, with GDP growth dropping to 1.6% from 3.4% in the previous quarter.?This?was a?bigger?slump than was expected, and inflation rose to 3.4% in Q1 2024 from 1.8% in Q4 2023. The US Federal Reserve’s decision on interest rates is?being closely watched?in light of these developments.

There is speculation that interest rates may go up, with some analysts predicting they could reach as high as 8%. However, the President of the Atlanta Federal Reserve has stated that?interest rates must be kept?at a “restrictive level” and that the Fed should not be in a hurry to cut rates. Despite these economic conditions, the US job market?continued to grow, with over 300,000 jobs added in March. However, small business owners’ confidence has decreased due to inflation, higher input and labour costs, and other economic headwinds.??

In the fashion sector, Adidas has confirmed that it expects to make profits of ￡598m this year after terminating its deal with Kanye West due to his antisemitic comments on social media. United Airlines reported a ￡161m loss in Q1 2024 due to grounding its Boeing 737 Max 9 fleet after an incident, and LanzaJet plans to build a second plant in the US. In the tech industry, Taiwan Semiconductor Manufacturing Company has agreed to?build?a third factory in Arizona, while?Apple has cut 614 jobs after abandoning plans to create a self-driving car.?

Far East China’s economy grew 5.3% in Q1 2024 despite the ongoing crisis in the property sector. Consumer confidence is waning, with Q1 retail sales growth falling to 3.1%. Shimao Group has been hit with a winding-up petition, while Country Garden delayed the publication of its annual financial results. BYD reported a 47% fall in profits in Q1 2024, and Xiaomi received nearly 89,000 pre-orders for its new electric vehicle, the SU7 Max.??

The US and China are seeking areas of cooperation, but there are disagreements about Taiwan and?sanctions imposed by the US?on Chinese-owned companies. The European Union Chamber of Commerce in China has called for the country to address growing concerns about “draconian regulations”.??

In Japan, the yen sunk to a 34-year low against the US dollar last month, while real wages fell for the 23rd consecutive month in February. The number of corporate bankruptcies with liabilities of 10m yen or more in fiscal 2023 rose by almost a third year-on-year to 9,053. NTT and Yomiuri Shimbun Group Holdings have warned about the impact of AI. Seven & i Holdings is considering listing its superstore business.?

Emerging markets Moody’s Analytics predicts India’s GDP will increase by 6.1% in 2024, down from 7.7% in 2023. The M&A market is thriving, and Elon Musk plans to visit India to make investment announcements. Vistara has scaled back services due to pilot protests. Despite sanctions, Russia’s GDP will rise by 3.2%, yet growth rates remain lower than pre-war levels. French President Macron accused Russia of running a disinformation campaign against the Paris Olympics. The BSE Sensex index rose by 0.63%, MOEX by 4.04%, and Bovespa fell by 0.89%.?

?

Sources: https://murdochasset.co.uk/wp-content/uploads/2024/05/MarketCommentaryCompliance_May24.pdf?

Murdoch Asset Management are a sister business of Alexander Grace within the IWP Financial Planning Ltd group.