Investment Institute
Weekly Market Update

Take Two: US growth beats expectations; ECB leaves rates on hold

  • 29 January 2024 (3 min read)

What do you need to know?

The US economy grew faster than expected in the final three months of 2023, delivering 3.3% annual GDP growth, well ahead of the 2% analysts had predicted. While the figure represents a slowdown from the previous quarter’s 4.9%, the expansion was underpinned by consumer spending and exports. Meanwhile the US composite Purchasing Managers’ Index (PMI) rose to a seven-month high of 52.3 in January from 50.9 in December with gains in both manufacturing and services activity. Earlier in the week, the Dow Jones Industrial Average and S&P 500 indices both reached fresh highs.


Around the world

European Central Bank President Christine Lagarde said it was “premature” to discuss easing monetary policy as the central bank kept its key interest rate on hold at 4.0%. However, tight financial conditions are dampening demand, helping to lower inflation, the bank said, reiterating its “data-dependent” approach to how long rates will remain high. Separately, Eurozone business activity fell at its slowest pace for six months in January, according to the latest PMI data. Business optimism has improved, though attacks in the Red Sea have disrupted shipping routes and supply chains. Elsewhere, the Bank of Japan and Bank of Canada both also left rates on hold last week.

Figure in focus: One trillion yuan

China’s central bank announced a 50-basis point cut to the amount of cash banks must hold in their reserves, injecting one trillion yuan (around $140bn) into the world’s second largest economy. The largest cut to the reserve requirement ratio in two years from the People’s Bank of China (PBoC) adds support for a recovering fragile economy amid the country’s housing crisis and weakening global demand. It also announced new rules to improve commercial property loans, raising hope for the real estate sector, though analysts believe more stimulus is needed.


Words of wisdom

Scope 3: Greenhouse gas emissions which are found along a company’s value chain, rather than coming directly from company-controlled sources (scope 1) or indirectly from operational energy use (scope 2). Scope 3 emissions account for both upstream, i.e., activities before the company’s own operations, and downstream – those after. In aggregate, scope 3 emissions account for 79% of total emissions, two-thirds of which come from the use of products. Scope 3 emissions reporting is set to become mandatory for many companies operating in the European Union, and similar disclosure rules are also due to be introduced for US companies doing business in California.

What’s coming up?

On Tuesday, the Eurozone publishes a flash estimate for fourth quarter GDP growth along with a spate of surveys covering January, including Economic and Industrial Sentiment and Consumer Confidence indices. On Wednesday, the US Federal Reserve meets to decide on interest rates while the Bank of England convenes on Thursday. Also on Thursday, Eurozone flash inflation figures for January are released, as well as final January PMI numbers for the Eurozone, UK, US, Japan and China. The US reports its latest employment numbers on Friday.

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