Written by Chris Ayton

Markets were mixed over the week. The UK equity market continued to give back some of its year end gains, with the FTSE All Share Index -0.7% over the week.  Conversely, MSCI Japan was up over 4% in GBP terms, with the index hitting a 30+ year high, as foreign flows into the market continued to be positive, supported by optimism around continued stimulus and corporate governance reforms. Overall, the MSCI All Country World Index of global equities was up +1.3% for the week, while bonds, as measured by the Bloomberg Global Aggregate Index Hedged to GBP, gained +0.5%.

On Friday, it was announced that the UK economy had rebounded 0.3% in November, driven by growth in the services sector with car leasing and strong Black Friday sales supporting the growth.  Although this news was taken positively, December data will determine whether the UK economy has avoided the technical recession in 2023 that many forecasters expected at the beginning of the year. Markets took the news positively, pricing in a slightly higher chance that the Bank of England will begin to cut interest rates in May.

Elsewhere, China’s consumer price index (a key measure of inflation), fell 0.5% in December, in deflationary territory for the third consecutive month, as consumer sentiment remains weak and the property sector remains stuck in the doldrums.  That said, leading economic indicators that we look at internally show a notable pick-up in activity in certain key areas of the economy in China.  Some loosening of fiscal and monetary policy in Q4 2023 and some targeted help for the property sector will take time to come through.  Whether these moves will be strong enough to offset the deflationary pressures remains to be seen. However, with China’s equity market at rock bottom valuations, any rebound in the economy could provide attractive upside for equity markets in China and across associated Emerging Market indices.

Taiwan went to the polls on Saturday, with the incumbent Democratic Progressive Party (DPP) winning a third term in office. Unlike its opposition parties, the DPP continues to refuse to consider Taiwan part of China, resulting in ongoing tensions with its superpower neighbour.  However, it was notable that the DPP won with a much reduced share of the vote and lost its majority in the legislature, perhaps providing some encouragement to China that a peaceful and diplomatic solution can be found to deliver greater cooperation going forward.


Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 15th January 2024.

© 2024 YOU Asset Management. All rights reserved.