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Investment Institute
Weekly Market Update

Take Two: Doubt over early rate cuts; China meets 2023 growth target

  • 22 January 2024 (3 min read)

What do you need to know?

The European Central Bank (ECB) is more likely to start cutting interest rates in the summer, than the spring as markets had anticipated, ECB President Christine Lagarde has indicated. This alongside the news that Eurozone inflation was confirmed at 2.9% in December from 2.4% in November, saw European stocks ease back. The potential timing of rate cuts elsewhere was also thrown into doubt after UK inflation rose to 4% in December from 3.9% in November, above market expectations and the first rise in 10 months.

Around the world

China’s economy grew 5.2% last year, meeting the government’s target of “around 5%”, as fourth quarter (Q4) GDP also came in at 5.2% year-on-year. However, the Q4 figure was slightly below the 5.3% analysts had expected, though ahead of Q3’s 4.9%, while 2023’s growth rate largely benefited from base effects from the year before. The world’s second-largest economy has experienced an uneven post-pandemic recovery, amid a property market downturn, and questions over the efficacy of the government’s stimulus package. Separate figures showed China’s birth rate fell to a record low last year, raising further concerns over long-term economic growth.

Figure in focus: 450 million tons

The European Union is planning to capture and store up to 450 million tons of carbon dioxide (CO₂) per year by 2050 to help meet the bloc’s climate change targets, according to reports. The draft proposal reportedly said 100 million tons of CO₂ would be captured from power plants and up to 200 million tons taken from the atmosphere directly to balance remaining industry-released emissions. Meanwhile, a report by the World Economic Forum and McKinsey Health Institute has found closing the gender health gap by improving funding for women’s health could add at least $1trn every year to the global economy by 2040.

Words of wisdom

CaucusA local meeting of members belonging to a particular political party to discuss and select candidates and decide policy. The first 2024 US presidential nomination contest, the Iowa caucus, took place last Monday and saw former President Donald Trump take a significant win in the state, receiving 51% of votes. Florida Governor Ron DeSantis secured second place with 21% of votes. The Iowa caucus also decides the state’s 40 delegates who will attend the Republican National Convention in July, where the party will choose its official presidential nominee for the election this November. The next contest takes place in New Hampshire this week, where Trump is also favourite to win.

What’s coming up?

This week sees several central banks meet to decide on interest rates. The Bank of Japan convenes on Tuesday, the Bank of Canada on Wednesday while the ECB meets on Thursday. In terms of economic data, a series of flash Purchasing Managers’ Indices for January are expected from the Eurozone, US, UK, and Japan on Wednesday. Elsewhere, Germany will publish its Ifo Business Climate index for January, a closely watched indicator of the country’s economic health, on Thursday, when the US will also announce GDP growth for the final quarter of 2023. 


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