Author — Martin Young, CEO of Farringdon Asset Management

Global Macro Review

Major markets have a shaky start on the first few days of the year while commodities have dipped.

Crude Oil (WTI)

• WTI crude has dipped drastically from USD 92.76 to  USD  72.76 per barrel. This is due to potential talks by Saudi to increase more supply in the market.
• On the other hand, Russia has been decreasing their rate of production of crude.
• India is undergoing a restructuring for their payment for  Russian Oil as  Russia is no longer receiving India rupee for Crude. Russia has set UAE Ethereum as crude currency.
• From Supply disruption in Russia and increase production from other countries, crude price could slip further.
• Based on current market fundamentals, Crude prices may dip to as low as  USD  60 per barrel.

US Market

• US job data outperformed with 216k added jobs in December 2023 verses expectation of 170k, beating estimates.
• Unemployment rate is at all-time low of 3.7%.
• US PMI (Purchasing Manager Index) data for December 2023 dip to 48.2. PMI data below 50 indicates a contraction if the economy which points to recession.
• US inflation rose slightly to 3.2% up from 3.1% in November 2023 which may reduce market expectations for interest rate cuts.
• Farringdon View is that a soft landing is likely and should have a positive impact for the stock market.
• Should the FED cut interest rates, bond and stock valuation will rise.

UK Market

• UK PMI data rose to 53.4%, up from 52%. This indicates that the service sector is expanding which may be due to the massive increase of  immigrants migrating to the country.
• Despite the high mortgage lending rate, the pounds increase against most currencies.
• UK inflation dipped to 3.9% in November, beating expectations. The rate of decline in inflation rate may result in an earlier cutting of interest rates.
• Expectations for UK interest rate is to reach the 2% target by 2nd quarter of 2024.
• Farringdon view on the UK market is that the FTSE 100  will  continue to  climb higher.
• UK rate cut may happen slower than the US market. Most borrowing are currently done using the USD. The higher interest rate differential between the USD and Sterling will increase the value of the sterling which may lead to FTSE valuation rising.

European Market

• The eurozone inflation rose sharply from 2.4% in Nov to 2.9% in December.
• The European economy may contract in the Q3 2024 which is pointing to a recession.

Chinese Market

• The Chinese market sees 80 billion wiped off tech companies as crackdown on online gaming begins. Limiting spending on in game purchases and game time. However, officials back pedal the following day.
• The 2 large cap companies badly affected are Bytedance Ltd and Tencent holding limited.
• Chinese shadow bank (Zhongzhi Enterprise Ltd) has filed for bankruptcy.
• Shadow banks are structured products that gives a fix rate return. This is essentially a loan.
• The Chinese market could be over 300% in debt and stocks are down 41% from 2021 highs. Market expectations is that the fall will continue till the later months of 2024.
• Farringdon view is that advisors can take another look at the Chinese market at the end of Q1 2024.
• Should a republican president be chosen in the US elections, US stocks should rally as there may be more tax cuts and additional government spending.

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The information contained in this document is for information only and should not be taken as a recommendation to buy or sell. Investors are reminded that past performance is no indication of future performance.