Market Update

UK Markets
The UK’s latest GDP figures provided a welcome boost, showing the economy grew by 0.4% month-on-month in May 2024, a sharp improvement from April’s stagnation and double the anticipated 0.2% rise. Growth was driven by the services sector, particularly retail trade, which expanded by 0.3%, alongside a robust 1.9% increase in the construction sector. The data indicates the UK is firmly moving past last year’s minor recession, a factor the Bank of England may weigh when deliberating the timing of its first interest rate cut.
Ireland
The Irish government approved its Summer Economic Statement this week, outlining plans for a substantial increase in public spending. Public service funding will rise by nearly 7% in the forthcoming pre-election budget, breaking the self-imposed 2021 spending cap of 5% annual growth. Officials attributed the departure from the rule to a sharp and unexpected rise in the Republic of Ireland’s population, which has created greater demand for public services.
US Markets
In the US, encouraging inflation data spurred optimism over potential interest rate cuts. Consumer Price Index (CPI) figures revealed inflation slowed to 3% year-over-year in June, down from May’s 3.3% and aided by falling gasoline prices and moderating rents. Core CPI, which excludes food and energy, rose 3.3%, slightly below the forecasted 3.4%, further reinforcing the view that inflationary pressures are easing.
This data prompted a shift in market sentiment, with investors moving capital out of big tech stocks and into smaller companies expected to benefit from potential rate cuts. Federal Reserve Chair Jay Powell maintained a cautious tone, emphasizing the need for “more good data” before considering a reduction in interest rates. However, with inflation steadily cooling, there is growing anticipation that the Fed may cut rates before the end of the year.
Asia-Pacific Markets
In Asia, the Hang Seng Index ended the week higher, gaining 2.77%. Data from China revealed a record trade surplus of $99.05 billion in June 2024, up from $69.80 billion a year earlier and surpassing market expectations. This marks the largest trade surplus since July 2022, fueled by an 8.6% surge in exports, the fastest growth in 15 months, while imports contracted by 2.3%, defying forecasts of growth.
Investors are now turning their attention to China’s Third Plenum, a three-day meeting beginning on July 15, where the Chinese Communist Party is expected to announce critical economic policies shaping the nation’s future.