Written by: Derren Nathan | Hargreaves Lansdown:
- US market pause for breath following recent losses
- Chinese inflation slows, as fears for recovery emerge
- Japanese stocks march on. No change expected from BoJ rates
- FTSE set to open down c.20 points
- Gold and oil take a hit
- Pace of UK property slowdown contracts. Rents to rise further
There was some respite for US investors yesterday as markets took a moment to digest losses from earlier in the week following Fed Chairman, Governor Powell’s hawkish speech to Congress. The Dow edged up 0.1% to 3,992.01 whilst the Nasdaq Composite fared a little better, posting a 0.4% gain to 11,576.00. According to the ADP National Employment Report, US companies added 242,000 jobs in February, some way ahead of analyst consensus. Overall, this doesn’t give much comfort that the Federal Reserve will be able to relax its stance at this month’s meeting. We’ll be paying close attention to today’s jobless data to see whether there is any sign of the labour market beginning to tighten. Two-year treasury yields have this week breached the 5% level for the first time in 15 years.
Looking further east, Japanese stocks added to recent gains with the Nikkei rising 0.5% overnight. That follows weak GDP data for the fourth quarter of 2022, giving more optimism that the Bank of Japan will continue its dovish stance when it meets at the end of this week. Forecasts are generally expecting no change to current interest rates. In China, the lowest inflation figures for a year sparked further doubt over the strength of a potential post reopening bounce in the economy, The Shanghai Composite lost 0.31% on Thursday. Meanwhile in London, the FTSE 100 is poised to retreat further from the 8,000 level and is expected to open down around 20 points at about 7915.
The Royal Institute of Chartered Surveyors’ (RICS) survey showed demand for property fall for the 10th month in a row albeit at a slower rate than of late. House prices continue their downward trajectory, with sellers of more expensive properties being more likely to drop below their initial asking prices. Both supply and demand side pressures are expected to drive rents higher, adding yet more fuel to the cost-of-living fire.
Brent Crude prices have slipped further now sitting at under $83 per barrel, driven by expectations of further rate hikes as well as resilient Russian production. Gold prices have also suffered in the wake of Chairman Powell’s comments, now at $1,813.78 per ounce down from over $1,850 earlier in the week.
DS Smith, a key supplier of packaging to the e-commerce industry, has updated on third quarter trading. Whilst positive trends in profitability have continued as expected in the second half this is more to do with the company’s resilient pricing and internal efficiencies than underlying demand from its end customers. Volumes are trending lower due to ‘market weakness and evidence of de-stocking over Christmas and New Year’. This makes DS Smith’s progress on profit and margins all the more impressive.