Weekly Market Update 20/12/2024

Yesterday, at their last meeting of the year, the Bank of England Monetary Policy Committee voted by a margin of six-to-three to hold interest rates at 4.75%, as recent increases in wages and prices indicated inflation still persists. The hold on rates comes despite the BoE downgrading its prediction of growth prospects for the last quarter, from 0.3% to zero. Traders still expect two quarter of a percentage point rate reductions next year, although this is far below market expectations of four from as recently as October.

Today, China’s one-year sovereign bond yields fell to 0.92%, a level last seen during the global financial crisis, as it is expected the central bank would further ease monetary policy as domestic demand slows according to the disappointing November retail data. Markets are expecting further rate cuts next year to boost the economy, as the People’s Bank of China announced one year and five-year prime rates would remain unchanged.

The US Congress must find a deal today to avoid a government shut down as the House of Representatives voted down the latest funding bill despite support from Donald Trump.  The failed bill would have extended government spending, sent billion of dollars to communities affected by natural disasters, and – a crucial priority for Trump – suspended the debt ceiling for two years. Bills require a two thirds majority to pass, and with 38 Republicans voting against the package, Republican Speaker Mike Johnson will have his work cut out to reach an agreement today.

Andrea Wood, Chartered MCSI
Investment Manager