It has been a mixed start to the year for global equity markets. The UK market was hit by disappointing inflation data, which showed that the UK Consumer Prices Index logged an unexpected rise from 3.9% to 4% in December. Despite the small increase, the Bank of England has opted to keep interest rates flat at 5.25% amidst expectations that inflation will decline in the coming months.
The US equity market performed well with hopes of impending rate cuts pushing the S&P 500 index to new all-time highs. Emerging markets on the other hand had a difficult start to the year led by a decline in Chinese equities. Although China’s fourth quarter GDP growth of 5.2% was in line with expectations, it remains low by historic standards.
Full round-up of January market performance
In the UK, the FTSE 100 index fell 1.27% while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, dropped 1.48% and 2.20%. In the US, the S&P 500 USD index gained 1.68% while in Europe the Eurostoxx 50 EUR index climbed 2.97%. Japanese stocks measured by the Topix JPY index surged 7.81%.
Emerging markets returns were mostly negative, with the MSCI Emerging Markets index declining 3.48% in local currency terms. Latin American equities, measured by the MSCI Latin America local currency index, conceded 3.05% while Indian stocks measured by the Nifty 50 INR index slipped 0.03%. Chinese stocks measured by the MSCI China CNY index slumped 10.43%.
In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, lost 2.20% with long dated (over 15 years to maturity) gilts falling 4.90%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, declined 0.89%. In the high yield market, the Bank of America Merrill Lynch Sterling High Yield index grew 1.61%.
In the commodities market, the S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, rose 4.47%. Brent crude oil futures amassed 5.86% during the month. In the precious metals markets, the S&P GSCI Gold and Silver indices returned -0.70% and -3.34% in USD respectively, while in the agricultural markets as corn and wheat futures dipped 4.88% and 5.21% in USD respectively.
In the currency markets, it was a mixed month for the pound as it depreciated 0.34% versus the US dollar but gained 1.67% versus the euro and 3.82% against the yen.
