Global markets failed to maintain 2023’s high spirits, kicking off the new year on a decidedly more restrained note. Mixed signals from central banks amid sticky inflation tempered investor expectations of imminent interest rate cuts, while ho-hum earnings from some big names in banking and tech saw a degree of caution creep back into trades.

That said, the S&P 500 snagged its first record-high close in two years, nudging it into bull market territory – largely on the back of last year’s eye-watering momentum. The US market remains extremely top-heavy, with almost 30% of the index concentrated in the so-called Magnificent 7: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla.

While US inflation was a touch higher than expected in December, the Federal Reserve kept interest rates on hold and indicated they’d now peaked, though it was less forthcoming on when they might switch direction.

At home, investors cheered a promising drop in headline inflation, with consumer prices up by 4.7% in the December quarter compared to a year ago – the first sub-5% reading in over two years. However, the RBNZ’s chief economist rained on that parade, pointing out that while imported inflation was well and truly off the boil, the domestic component was still too high at 5.9%. Meanwhile, businesses are feeling more cheerful about the future, with only 10% of those surveyed expecting conditions to deteriorate over the year, down from 49% (seasonally adjusted) in the September quarter.

It was slightly better still across the Tasman, with the annual pace of consumer price inflation in Australia slowing to a two-year low of 4.1% in the fourth quarter. However, the resource-heavy local market was held back by volatile commodity prices, particularly for iron ore.

Elsewhere, China's stock markets continued their slide, while Japanese equities appear to have emerged from a decades-long spell in the doldrums. The Nikkei 225 surged to a 34-year high as Japan’s central bank continued to resist calls to hike rock-bottom interest rates.

Against this backdrop, the S&P 500 rose by 1.6% in January, while the tech-focused Nasdaq finished up by 1.0%. The NZX 50 was slightly more subdued, gaining 0.6%, while the ASX 200 finished up by 1.2%.

Meanwhile, the UK’s FTSE 100 started the year on a less upbeat note, falling by 1.3% as inflation confounded expectations by accelerating for the first time since February 2023. UK consumer prices rose by 4% in December, compared with a year ago, up from 3.9% in November.

 

GBP and AUD / NZD exchange rate change from 31 December 2023 to 31 January 2024:

 

GBP and AUD / NZD exchange rate change from 31 January 2023 to 31 January 2024:

 

 

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Monthly Summary - December 2022

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Monthly Summary - December 2021

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Monthly Summary - December 2020

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