The Bank of England (BoE) refrained from easing interest rates at last week’s Monetary Policy Committee (MPC) meeting despite the welcome news of headline inflation slowing to its target 2.0% level[1]. Having reached a four-decade high of 11.1% in October 2022, inflation has slowed significantly over the past eighteen months and May’s reduction came on the back of slower food and drink price rises. That said, it’s worth noting that food prices are circa 25.0% higher than where they were at the start of 2022 and for many people, the cost-of-living crisis remains far from over. Despite that, the MPC held steady on rates with seven of the nine committee members voting for the status quo once again. Financial markets are now pointing towards August as the month of the first rate cut with an additional trim forecast before the end of the year. The FTSE 100 and FTSE 250 were buoyed by the inflation data, the former rising by +1.1% and the latter by +1.6%.
Elsewhere, US equities continued their march upwards in what was a holiday shortened trading week due to the Juneteenth holiday. The S&P 500 reached another record high, recording a weekly gain of +0.6% (in US dollars) with signs emerging of a broadening of returns beyond the narrow drivers of the market so far this year. Back in Europe, the MSCI Europe ex UK index rose by +0.7% (in euros) despite the lingering political uncertainty across the Continent. In Asia, Chinese equities remained in reverse with the Shanghai Composite shedding -1.1% in local currency terms on mixed economic data. Meanwhile, equities also lost ground in Japan where the Nikkei 225 declined by -0.6% due to higher inflation data.
Moving to commodities, oil prices rallied on the back of lower inventory data in the US, a signal that summer driving season is starting to gather momentum. Brent crude jumped by +4.0% to $85.92 a barrel having reached a seven-week high during the week. Critical industrial metal copper declined by -0.7% to $9,547 a tonne despite strong demand signals with a stronger US dollar a possible headwind. As for gold, the precious metal was flat at $2,322 an ounce; it has risen by circa +7.0% during the second quarter.
Week Ahead
Day | Country | Measure | Period | Forecast | Previous |
Monday | N/A | - | - | - | - |
Tuesday | N/A | - | - | - | - |
Wednesday | US | New Home Sales (Annually Adjusted) | May | 0.640m | 0.634m |
Thursday | Japan | Retail Sales YoY | May | 2.00% | 2.40% |
US | Durable Goods Orders | May | 0.00% | 0.60% | |
US | Final GDP QoQ | Q1'23 | 1.40% | 1.30% | |
US | Pending Home Sales MoM | May | 2.50% | -7.70% | |
Friday | Japan | Industrial Production YoY | May | 2.00% | -0.90% |
Japan | Unemployment Rate | May | 2.60% | 2.60% |
Source: Refinitiv Workspace, 24/06/24
[1] ONS – CPI Inflation May 2024
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