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Equity rally continues

Last Week in the City provides a round-up of market movements and the global investing outlook. This covers the week to 1 March 2024.

| 7 min read

Equities posted another positive performance in January, as the rally that started in November continued. The official US fourth-quarter GDP figure was cut slightly at its second reading, but the economy remains strong. The Federal Reserve had some positive news as a widely watched measure of inflation eased.

On the corporate front, St James’s Places shares slumped after the wealth manager was forced to set aside money for potential refunds to clients as customer complaints over its charges mount. Apple also abandoned its attempts to build an electric car and Taylor Wimpey reported signs of life in the UK housing market.

Over the week, the blue-chip FTSE 100 index was -0.2% by mid-session on Friday, with the more UK-focused FTSE 250 trading up 0.1%.

Economics

Three Federal Reserve officials said that the pace of interest-rate cuts will depend on incoming economic data. Boston Fed President Susan Collins and New York’s John Williams said a rate from the US central bank will likely be appropriate “later this year,” while Atlanta’s Raphael Bostic said he’s currently pencilling in a cut for some point during the summer.

Nevertheless, some positive data for the central bank emerged. US inflation fell to 2.4% in the year to January. Data on personal consumption expenditures, the US central bank’s preferred gauge of price pressures, matched consensus expectations of 2.4%. This was down from 2.6% in December.

US economic growth in the fourth quarter was lowered slightly in its second official reading, but its composition was much stronger than initially thought.

US economic growth in the fourth quarter was lowered slightly in its second official reading, but its composition was much stronger than initially thought. Gross Domestic Product (GDP) increased at a 3.2% annualised rate, down from the previously reported 3.3%. This reflected a downgrade to inventory investment. There were upgrades to consumer spending, state and local government investment as well as residential and business outlays.

Eurozone inflation dipped further, strengthening the case for the European Central Bank to start easing interest rates from record highs later this year. In France, EU harmonised inflation dipped to 3.1% from 3.4% while in Spain, it slowed to 2.9% from 3.5%. In Germany, most states reported big dips, suggesting that a fall to 2.7% from 3.1% as expected by economists, was realistic. However, rising wages prevented price rises for services from slowing, tempering hopes that the European Central Bank will start cutting borrowing costs soon.

Geopolitics

Russian President Vladimir Putin warned Western countries that there was a genuine risk of nuclear war if they sent their own troops to fight in Ukraine, and he said Moscow had the weapons to strike targets in the West. The warning followed an idea, floated by French President Emmanuel Macron earlier in the week, of European NATO members sending ground troops to Ukraine – a suggestion that was quickly rejected by the US, Germany, Britain and others.

US congressional leaders have reached a deal to avoid a 2 March partial government shutdown and fund parts of the government until 30 September. Under the arrangement, the remainder of the government, including the Defense and Homeland Security departments, would still face a potential 23 March shutdown.

Talks between the G20 finance ministers in Brazil and the World Trade Organisation conference in Abu Dhabi have been overshadowed by war.

Company news

Shares in St James’s Place slumped after the wealth manager was forced to set aside £426m for possible refunds to clients as customer complaints over its charges mount. The company, which manages £168bn in client assets already cut a range of prices in October. The firm's latest problem relates to a surge in complaints over services customers claim not to have received. Management said it had found gaps in its record-keeping and had started to refund affected customers. Chief executive Mark FitzPatrick, who took the helm in December, has launched a review of the business.

Apple is scrapping its decade-long attempts to build an electric car. The company made the disclosure internally, surprising the nearly 2,000 employees working on the project. The decision ends a multibillion-dollar effort that would have launched Apple into a new industry.

Retail property landlord Hammerson reported a record year of leasing, which contributed to an 11% uplift in adjusted earnings in annual results. The company also reported encouraging footfall and sales numbers across its shopping centres, with footfall up 3% year-on-year, with like-for-like sales up 1% in its UK asset and up 3% in France. However, the group’s portfolio valuation was down 2.6% to £4.7bn.

The owner of the London Stock Exchange said it was seeing an encouraging initial public offering pipeline for the year ahead as its boss pledged an “aggressive” push to revive the market from a historic slump in listings last year. Full-year pre-tax profits edged lower. The group has pivoted heavily towards its data business in recent years and now generates about 4% of its revenues from its stock exchange.

Online grocer Ocado said that it swung back to an underlying profit in 2023 as its joint venture with M&S returned to profit. However, Ocado made a pre-tax loss of £403.2m for the year, but this was better than the £500.8m loss reported a year earlier and analysts’ expectations of £410m.

Shares in retailer Halfords fell after the company delivered a surprise profit warning with just one month to go before the end of its financial year – and said there would be no profit growth next year. The cycling market has also become more challenging and competitive, with increased promotional activity and more customers buying on credit, which has dented margins.

Fund group Schroders posted a 16% drop in pre-tax profit last year because of “headwinds in the markets”, but positive flows helped to boost total assets under management. Operating profit of £661m was 9% lower year-on-year. The group said its profit was “impacted by headwinds in the markets and adverse foreign exchange rates”. However, the company pulled in £9.7bn of new business during the year, excluding joint ventures and associates.

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Equity rally continues

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