29 February 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Markets are today awaiting PCE inflation data out later, an important input into Federal Reserve policy setting. Expectations are for a rise in the core month-on-month figure from 0.17% in the prior month to 0.4% in the February data, amidst signs that the final mile of inflation reduction in the US may in fact be the hardest. This has been a key driver of falling expectations for US central bank rate cuts in 2024 over recent weeks, with Fed officials underlining they are remaining data dependent in their approach.
“Meanwhile, retail sales data out this morning from the German economy showed a month-on-month contraction of -0.45%, missing expectations for 0.5% growth. On a year-on-year basis, sales declined 1.4%, slightly better than the prior month’s 1.6% annual fall. The German economy has continued to struggle in 2024, with signs that it is not enjoying the slight pick-up in the outlook evident in other parts of Europe. With heavy reliance on a still-troubled manufacturing sector, where lingering high energy costs have seen sub-sectors like chemicals put under pressure, the question will be whether Germany may be supported by a recovery in the global manufacturing sector, or whether wider European growth will be dragged down instead.
“Japanese industrial production missed expectations of a 6.8% decline and fell 7.5% month-on-month in January, the steepest drop since May 2020. This was driven by an 18.6% drop in the Autos sector, due to a production suspension by Toyota in the face of earthquake damage and the Daihatsu safety testing scandal. Elsewhere, retail sales rose by 0.8% month-on-month, marginally ahead of expectations at 0.5% but nevertheless signalling a slow start to the year. That said, with signs that Japan will soon be shifting away from its lengthy period of negative interest rates, it could be that supportive structural factors play a greater part in market returns than weaker cyclical factors, supporting the investment case in the region.”
