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Ormiga Capital Admin

Ormiga Weekly Market Update: 17th November 2023

Updated: Apr 3

US

Consumer price inflation in the US dropped to 3.2% last month, offering a glimmer of relief for American households and the Federal Reserve. While prices continue to climb, the rate of increase is the slowest seen in two years. The cooling of US consumer price inflation, which had been on the rise for the past couple of months, led to a significant surge in US stocks and provided some comfort to Americans grappling with persistently high prices. The Consumer Price Index (CPI) rose 3.2% for the 12 months ending in October, marking a decline from September's 3.7% and representing the lowest annual rate since March 2021. Notably, energy prices and airfares experienced significant declines, though these were offset by ongoing increases in housing, food, and restaurant costs.


Despite concerns earlier in the year regarding a potential recession, the US economy is anticipated to outperform consensus expectations in 2024, according to Goldman Sachs Research. The projection indicates a 2.1% expansion in US GDP for the full year of 2024, notably surpassing the 1% consensus forecast among economists surveyed by Bloomberg. Goldman Sachs Research reaffirms its longstanding perspective that the likelihood of a US recession is considerably lower than commonly perceived, estimating it at just 15% over the next 12 months.


On the energy front, US crude prices experienced a dip this week, hitting a four-month low due to increased inventories and reduced demand from China. Concerns persist regarding China's crude demand amidst its array of economic challenges. The country's refining output notably declined by 2.8% in October, dropping to 15.1 million barrels per day, as reported by China's National Bureau of Statistics. This decline further contributes to the apprehensions surrounding China's economic outlook and its implications for global energy markets.


Europe

Equities in Europe closed a positive week with further gains on Friday, shrugging off an initially uncertain start in New York and a slightly underwhelming UK retail sales report. Notably, London saw an increase in China-exposed stocks, driven by investor optimism amid indications of improving relations between the US and the Asian powerhouse. The UK's FTSE 100 added 1.95%, Spain’s Ibex rose 4.16%, France's CAC40 closed the week up 2.68% and Germany's DAX rallied over 4.49% this week.


France's government revealed intentions to curtail spending on business subsidies and healthcare as part of an effort to secure 12 billion euros in savings by 2025, according to government sources on Thursday. President Emmanuel Macron's administration aims to decrease France's public spending, which stands as the highest in the world concerning the size of the economy, aligning with deficit reduction commitments. The ongoing 2024 budget bill in parliament outlines plans for 16 billion euros in savings, predominantly through the gradual removal of temporary power and gas price caps.


Spain has become a sought-after destination for more Americans, whether they are digital nomads working abroad or retirees seeking a new lifestyle. The number of Americans residing in Spain surged by 13% from 2019 to 2021, while home sales to Americans skyrocketed by 88% from the first half of 2019 to the first half of 2022, as outlined in a report by the General Council of Notaries in Spain. Among expat groups buying property in the sunny country, Americans ranked second in property expenditure, trailing only the Danes, spending up to 2,837 euros or $3,119 per square meter. Moreover, American buyers accounted for the steepest increase in home prices during this period, per the report's findings.


UK inflation recorded its lowest level in two years in October, allowing Prime Minister Rishi Sunak to highlight success in his pledge to halve the rate of price increases this year. However, commentators caution that businesses and households still grapple with persistently high expenses and a sluggish economy. Consumer prices rose by 4.6% last month compared to a year ago, a significant decline from September's 6.7%, according to the Office for National Statistics (ONS). This deceleration primarily stemmed from a substantial decrease in household energy bills, reflecting lower wholesale prices for natural gas.


Asia

Chinese leader Xi Jinping expressed China's willingness to foster a partnership and amicable relationship with the United States during a speech delivered to American business leaders in San Francisco. Speaking at an event alongside the Asia-Pacific Economic Cooperation (APEC) forum, Xi emphasized the pivotal question guiding bilateral relations: whether the two nations perceive each other as rivals or partners. He aimed to rekindle positive ties by invoking shared history and symbols of warm US-China relations, seeking to attract US businesses at a time when foreign investment in China has declined.


In Japan, a government report highlighted a 1.6% increase in exports for October compared to the previous year, driven by heightened shipments of automobiles and ships. While exports to other Asian countries declined, there was a notable surge in exports to the US and Europe. However, the pace of export growth slowed from the 4.3% recorded in September. This deceleration might pose challenges for Japan, heavily reliant on export-driven manufacturing for economic growth. On a positive note, the return of tourists, considered as part of exports, has contributed positively after pandemic-related travel restrictions eased.


Indonesian President Joko Widodo announced that Exxon Mobil intends to invest up to $15 billion in a significant petrochemical project and the development of carbon capture and storage (CCS) facilities in Indonesia. President Widodo, commonly known as Jokowi, revealed this plan following a meeting with Exxon's Chairman Darren Woods during the Asia Pacific Economic Cooperation (APEC) summit in San Francisco. The proposed CCS facilities are anticipated to be the largest in Southeast Asia, marking a substantial commitment by Exxon in the region.


[Disclaimer: The information provided in this blog post is for educational and informational purposes only and should not be construed as financial advice. Consult with a qualified financial professional before making any investment decisions.]








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