Weekly podcast – Market overview
This week’s host, Investment Manager, Jack Bishop is joined by regular commentator and Head of Fixed Interest Richard Carter alongside Quilter Cheviots Consumer Discretionary analyst Mamta Valechha to discuss both equity and bond markets peak rates. Among the topics discussed: Gilts, International banks, UK election and much more.
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Market overview: Richard Carter, Head of Fixed Interest Research
Global equities advanced last week with US stocks, particularly in the tech sector, leading the move higher. The MSCI All Country World Index posted a weekly gain of 0.6%, leaving year-to-date gains at 12.3%.
Outperformance of US tech stocks has been one of the main themes of 2023 and it has come to the fore once more in the recent rally. Tech benchmarks rose 2.4% last week, taking the gains this year to 32.8%. Broader US indices also performed well, rising 1.4% on the week and in the process chalking up eight consecutive daily gains – the best run in two years. Although this streak was ended last Thursday a strong session on Friday saw the pullback fully recouped and benchmarks close at their highest level of the week.
There remains some concern around the US Treasury market and the dip on Wall Street on Thursday followed a US$24bn auction of 30-year Treasury bonds that received the weakest level of demand in two years. However, the impact on stocks proved short lived and there was a pleasing display of strength into the weekend. In a quiet week of economic data the US 10-year Treasury yield increased 8 basis points to close at 4.65%.
UK economy plodding on
Third quarter GDP showed zero growth in the UK, matching the Bank of England (BoE) forecasts, following a 0.2% expansion in the previous three months. The monthly figure provided some better news, pointing to a 0.2% expansion in September, although August’s figure was revised down 10 basis points to 0.1%. Overall, the data is in keeping with the feeling that the UK continues to defy calls for a recession but is struggling to grow at a significant clip.
Prominent BoE members provided mixed messages on the future path of interest rates last week with governor Andrew Bailey stating it was too early to discuss cutting rates shortly after chief economist Huw Pill said that market pricing for a first cut in August 2024 was not unreasonable. While you can dive into the semantics of the comments there was a clear market reaction and after a strong move lower, government bond yields ended up posting a weekly rise with the 10-year gilt yield ending up 5 basis points at 4.33%.
UK stocks declined on the week, ending 0.6% lower to trim year-to-date gains to 2.1%. There was a notable depreciation in sterling too, finishing at 1.22 against the US dollar. European bourses managed to eke out a small gain, rising 0.2% to take 2023 gains to 8.3%.