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Matthew Boxall, of Team Asset Management, offers their weekly round-up of global markets
IN line with the ongoing trend of disinflation, chairman Jerome Powell and his US Federal Reserve colleagues issued a soft statement indicating imminent rate cuts, sparking a surge of optimism among investors. Although concerns such as the loosening employment market are still present, the market is overlooking these apprehensions, propelling the primary US stock market indices to their seventh straight week of gains with investors looking to squeeze as many gains as possible before the year end.
Closer to home, the UK economy shrank in October, catching economists off guard, with official statistics revealed a 0.3% month-on-month contraction. The Bank of England maintained its standard interest rate at 5.25% for the third consecutive month, aligning with expectations. Despite this steadiness, officials emphasised their readiness to raise lending rates should signs of enduring inflation arise.
The European Central Bank (ECB) maintained its key deposit rate at an all-time high of 4.0%, while revising its inflation and growth predictions downward for 2023 and 2024. The bank anticipates inflation to decrease to slightly under its 2% target by 2026, a development that is broadly interpreted as setting the stage for a potential reduction in interest rates. The ECB now forecasts that the economy will expand by 0.6% this year, marginally lower than its previous estimate, and by 0.8% in 2024, revised down from 1.0%. Additionally, the bank announced plans to gradually conclude the reinvestment of maturing securities under its emergency pandemic programme towards the latter half of 2024.
Three years after Epic Games, known for creating Fortnite, filed a lawsuit against Apple and Google for allegedly operating illegal app store monopolies, the company has clinched a victory against Google, despite an earlier loss in a similar case against Apple. The jury in Epic v. Google delivered a unanimous decision swiftly, concluding that Google possesses monopoly power in the Android app distribution and in-app billing service markets and has engaged in anticompetitive practices in these domains. Additionally, they determined that Google unlawfully tied its Google Play app store to the Google Play Billing payment services and found Google’s distribution agreement, Project Hug, which involves game developers, as well as its deals with Original Equipment Manufacturers (OEMs), to be anticompetitive.
The outcome of this case is not yet certain. Judge James Donato is tasked with deciding the appropriate remedies since Epic Games did not seek monetary damages but instead aims for a court order allowing every app developer the freedom to implement their own app stores and billing systems on Android. Judge Donato has expressed that he will not determine the fee percentage Google should charge, among other things, leaving the resolution unclear until both parties meet again in January to discuss a remedy.
Google’s shares dipped slightly following the news, but the broader implications of this trial are expected to be substantial for Google, Apple, and other tech giants. This legal battle is part of a much larger ongoing conflict within the tech industry.
At the COP28 climate summit held in Dubai, representatives from close to 200 countries reached a landmark agreement to shift away from fossil fuels, marking a potential turning point in the decline of the fossil fuel era. The accord underwent modifications following resistance from certain nations to the initial draft, which they felt lacked firm commitments to phasing out fossil fuels. Additionally, the updated agreement sets ambitious targets, including a threefold increase in global renewable energy capacity by 2030 and a significant reduction in methane emission.
Elsewhere in the markets, the crypto market continued to make gains despite Bitcoin settling in a new range between $42,000 and $43,000 for much of the week. It was the Layer 1 blockchain Solana ecosystem that was gaining the most attention with the Solana Saga smartphone selling out after months of slowing sales. The reason? Every phone came with a so-called “meme coin” that has risen over 2,500% since the end of October, making the free cryptocurrency worth more than the price of the phone.
Going into the last week before Christmas, we have a quiet week while investors figure out if the companies reporting earnings will be on the naughty (sell) or nice (buy) list, including sportswear giant Nike, delivery titan FedEx and cloud memory storage firm Micron Technologies. Eyes will also be on the US housing and Friday’s inflation data.
