US consumer sentiment at highest since 2021

It was a relatively quiet week in terms of US data whilst also being a shorter week because of the Martin Luther King Jr holiday on Monday.

Early in the week, a few regional activity figures such as the New York Empire State Manufacturing index, indicated a modest slowdown in demand.

On Wednesday however, the US Census Bureau released Retail Sales figures which exceeded expectations, rising by 0.6% compared to 0.3% the previous month, whilst online sales grew by 1.5% and hit a new record high. The figures imply that consumption remains stable in the US.

On Friday, the heavily watched University of Michigan’s Survey of Consumers was released, which showed that consumers have grown more confident about the direction of the economy and inflation at the beginning of 2024. The survey showed a reading of 78.8 for January, its highest level since July 2021. Whilst on a two month basis, sentiment showed its largest increase since 1991.

Across the Atlantic in Europe, stocks were in negative territory. Stocks declined following comments from European Central Bank (ECB) policymakers that a reduction in interest rates may take longer than investors had initially expected.

Speaking at the World Economic Forum, ECB President Christine Lagarde signalled that rate cuts would likely be in Summer as opposed to the generally expectation of markets that this would occur in Spring.

In Asia, Chinese equities slumped as the economic outlook continues to remain poor. The countries slow economic outlook has also been exacerbated by rising geopolitical tensions, particularly involving Taiwan. In recent weeks, Taiwan’s ruling Democratic Progressive party won an exceptional third term in office. The DPP is seen as a defiant choice against China in Taiwan, which continues to claim Taiwan as part of its territory.

Equities

Global stocks were up last week by 1.0% in euro terms and 0.2% in local terms. Year-to-date global markets are up by 1.7% in euro terms and by 0.2% in local terms. The US market, the largest in the world, finished up 2.0% in euro and 1.2% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.1% last week. The German equivalent finished at 2.3%. The Irish 10-year bond yield finished at 2.8%. The Euro/US Dollar exchange rate finished at 1.09, whilst Euro/GBP finished at 0.86.

Commodities

Oil finished the week at $73 per barrel and is up 3.8% year-to-date in euro terms. Gold finished the week at $2,030 per troy ounce and is up -0.4% year to-date in euro terms. Copper finished the week at $8,272 per tonne.

The week ahead

Wednesday 24^th January

US Manufacturing and Services PMIs are released.

Thursday 25^th January

ECB Interest Rate Decision.

Friday 26^th January

US Core PCE Price Index is issued.