January 2024 Wrap Up

What were the key moments in the market this month?

UK inflation rate fueled by booze and smokes

In a surprise uptick, UK inflation rose to 4% year-on-year in December, driven by increased prices for alcohol and tobacco. This marks the first increase in the annual consumer price index since February 2023. Economists had anticipated a slight decline to 3.8%, following November’s unexpected drop to 3.9%. Every month, the headline CPI climbed by 0.4%, surpassing the consensus forecast of 0.2% and rebounding from November’s -0.2%.

The Office for National Statistics reported that the most significant positive impact on the monthly changes in both CPIH and CPI annual rates was attributed to alcohol and tobacco. Meanwhile, the most substantial negative influence came from food and non-alcoholic beverages.

Wall Street’s take: China’s economic growth to ease in 2024

Major global banks predict a slightly slower growth for China’s economy in 2024 compared to the previous year. The annual forecasts from investment firms, including industry giants, Goldman Sachs and Morgan Stanley, suggest a 4.6% increase in real GDP this year, down from the anticipated 5.2% in 2023.

JPMorgan’s Chief China Economist, Haibin Zhu, emphasized the need to manage downside risks, particularly from the housing market correction, in 2024.

Gold takes a dive

Gold prices saw a dip on January 22, driven by a shift in investor expectations regarding a U.S. interest rate cut in March. The surge in equity markets further diminished interest in safe-haven gold.

According to Jim Wyckoff, a senior analyst at Kitco Metals, technical selling and a rally in stocks are the primary factors dampening enthusiasm in the gold and silver markets. “We have had better U.S. economic data lately, that suggests the Fed may have to hold off longer on lowering interest rates.” Rising interest rates raise the opportunity cost of holding onto bullion.

BoJ sticks to ultra-loose policy

The Bank of Japan stated that the likelihood of the world’s third-largest economy achieving the 2% inflation target was “gradually increasing.” This came after the central bank, as expected, maintained its ultra-loose monetary policy in its first meeting of the year. The BOJ unanimously decided to keep interest rates at -0.1% and adhered to its yield curve control policy, setting the upper limit for the 10-year Japanese government bond yield at 1%, in line with economist expectations.

Governor Kazuo Ueda, in a Tokyo press conference, affirmed that the economy is progressing as projected on the inflation front, with the core-core inflation forecast at 1.9%, very close to the 2% target. This consistency was noted both in October and the current assessment.