Market Update

This week, Apple issued a warning, citing disruptions in production and a decrease in Chinese demand due to the coronavirus outbreak. Apple is not the only company affected; many others relying on Chinese manufacturing supply chains and consumer markets are also feeling the impact. Consequently, global equity markets are bracing for additional stimulus measures to counter a potential worldwide economic slowdown.
Although the minutes from the recent Fed meeting indicated that policymakers didn't initially perceive the need for further policy accommodation, given the three US interest rate cuts in 2019, they did express concern about the risks posed by the coronavirus outbreak. Notably, this meeting occurred on January 28 and 29, 2020, just a week after the initial coronavirus reports emerged. Since then, supply-chain disruptions and a potential global slowdown have become evident. Consequently, there's speculation that the Fed might take action in their March or April meetings if the virus significantly affects the US economic outlook.
In terms of economic data, the focus was on the UK this week. CPI inflation rose to 1.8%, marking its first increase since July 2019, driven by higher petrol and oil prices. Core CPI, which excludes volatile items like food and energy, stood at 1.6%. The UK's unemployment rate was 3.8% as the economy added 180,000 jobs in Q4 2019. However, wage growth, including bonuses, slowed to 2.9%, its lowest rate since August 2018. Moreover, recent UK retail sales data, especially the 1.6% rise in sales excluding fuel in January – the largest surge since May 2018 – indicates a potential improvement in the UK economy after the December general election.
While this data might suggest a reduced likelihood of a Bank of England interest rate cut (especially if next month's budget includes a fiscal boost), it's essential to recognize that inflation remains below the BoE's 2% target. Additionally, the UK economy could quickly decelerate due to uncertainty over EU trade talks, which appear challenging based on recent exchanges between the UK and the EU.
Looking ahead, the upcoming week brings the second reading of Q4 US GDP, the Fed's preferred inflation measure (PCE), Chinese PMI, Japanese retail sales, and Japanese industrial production.
Furthermore, as the tax year end approaches, we urge you to make use of your ISA allowance. The current limit is £20,000, and if unused by April 5, 2020, it will expire. Feel free to reach out using the contact details provided in your email to initiate the process.