COP 28 ends with commitment to phase out fossil fuels

The latest international conference on climate change ended with a commitment to phase out fossil fuels in order to meet the target of limiting the increase in global temperatures and reach net zero for carbon emissions by 2050. This was despite significant opposition from many oil producers, including Saudi Arabia and host country the United Arab Emirates.

Oil has fallen in recent months despite efforts from Opec nations to push the price up by cutting supply. The International Energy Agency said there has been a sharp drop in global demand in the last quarter as economic growth slows and Covid-era supply issues are finally resolved. The IEA says supply from non-Opec nations should be more than enough to cover any increase in demand next year. Meanwhile the price of natural gas has dropped sharply as a warm start to the northern hemisphere winter and additional supply of liquified natural gas from the US have all pushed gas prices back towards their long-term levels. 

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• Markets: Continue to rise as US Federal Reserve indicates rate cuts are on the way
• Rates: Bank of England holds rates as economy cools
• USA: Rally continues as FED indicates rate cuts likely in 2024

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

Bonds: Europe takes the lead as Government bond rally continues

This week we saw more enthusiasm for government bonds as investors doubled down on the view that central banks will cut rates in 2024 and will cut them significantly. European government bonds led the rally following comments from several ECB members that appeared to confirm the view that the bank has finished hiking following the rapid slowdown in inflation. This was supported by lacklustre European economic growth. However, mixed signals on the strength of the US jobs market meant US government bonds gave back most of their gains.

The shift in sentiment has been dramatic. Only a few weeks ago the ECB was expected to leave rates elevated for longer than the Bank of England and Federal Reserve but markets are now pricing in up to six cuts in 2024 with rates brought down by 1.5 percentage points. Many bond investors will be cheered by the gains but the rapid change in outlook increases the chance that recent enthusiasm is overdone. In the short term markets are likely to be driven by each fresh data release or speech by a central banker. 

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• Bonds: Bond markets raise chance of disappointment as they price for aggressive rate cuts on 2024
• India: Outlook for strong growth helps drive Equities higher
• Equities: Airlines benefit from sustained demand for travel

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

More good news on inflation

This week saw government bonds lead a broad market rally once more. Better news for inflation and a gradual slowdown in economic activity raised hopes that the Federal Reserve may be able to engineer a soft landing, and bond markets are now hoping for rate cuts in the first half of next year. This caps a good month for markets and fixed income and global equities made significant gains. The positivity even extended to out of favour markets like UK equities and emerging markets shrugged off ongoing problems in China to record a post a strong gain. The outlier is commodities as a modest rise in gold has been offset by a significant drop in oil and gas prices.

The rally is welcome, particularly after recent challenging conditions for fixed income assets, but central banks remain cautious about declaring victory over inflation too soon. Another reason to avoid getting carried away is the time lag between rate hikes and their eventual effect on the economy. This usually takes 12 months to two years, so there is still a long way to go before the full impact of the recent hikes is apparent.

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• Us: Bonds and Equities rise as economy shows signs of slowing
• Retail: MUS consumers splash out during key Black Friday weekend
• China: Surprise drop in manufacturing output drags on stocks

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)