Monthly Market Review – January 2024


With the start of a new year, historically, January has been viewed as a positive month for equities, leading to a behavioural finance theory termed the ‘January effect’, which suggests that equities are more likely to increase in January than any other month of the year. Although, January was positive for some equity markets, whilst negative for others. Major central banks kept policy rates steady at their January meetings and signalled that, although rates may not increase further, they will only pivot when they are confident enough that inflation is under control. The Federal Reserve kept the rates steady at a 23-year high of 5.25%-5.5% for a fourth successive meeting in January 2024. Policymakers added that they do not anticipate it will be suitable to reduce the rates until they have gained greater confidence that inflation is moving sustainably toward 2%. The central bank noted that inflation has eased over the past year but remains elevated. The Bank of England is expected to keep key Bank Rate unchanged at a 16-year high of 5.25% for the fourth consecutive time during its first meeting of 2024. CPI inflation is projected to fall temporarily to the 2% target in Q2 2024 before increasing again in Q3 and Q4. The Chinese government seemed reluctant to deliver a major stimulus package due to attempts to control mounting government debts. Beijing in October outlined a massive CNY 1 trillion bond issuance to spur infrastructure spending. However, any more debt issuances are expected to be limited. Meanwhile, the PBoC has carried out liquidity injections to support the economy, but economists believe it has limited space to loosen monetary conditions further.

On the geopolitical front, the International Court of Justice (ICJ) issued Israel with six orders in relation to its bombardment of Gaza, but stopped short of calling for a full ceasefire. ICJ ordered Israel to abide by six provisional measures. Among these, the court ordered Israel to take all possible measures to prevent genocidal acts, to prevent and punish direct and public incitement to genocide, and to take immediate and effective steps to ensure the provision of basic services and humanitarian aid to civilians in Gaza. The court also ordered Israel to preserve evidence of genocide and to submit a report to the ICJ within a month laying out how it is complying with these orders. According to the ICJ’s American president, Joan Donoghue “The court is acutely aware of the extent of the human tragedy that is unfolding in the region and is deeply concerned about the continuing loss of life and human suffering”.

Looking at the performance of major asset classes, equity markets started the year on a positive note, extending the gains from the previous month, amid falling inflation levels in all major economies and hopes that interest rates will take downward trajectory sometime in the first half of 2024. Japan’s Nikkei 225 was the leader with stunning 8.43% monthly return in January amid foreign investors bolstering their positions in the rising Japanese stock market drawn by a depreciating yen that boosted exporters’ shares and a robust performance in the chip sector. European shares grabbed the next position where Euronext 100 surged over 2% despite concerns over a looming recession but a gradual easing in inflationary pressures. The US broader market index S&P 500 returned just under 1.7% as investors took cautious positions ahead of key policy decisions after spectacular performance over the last few months driven by ‘Magnificent 7’ stocks. The DJ Islamic market index appreciated by 0.52%. On the other hand, China’s Shanghai Index fell 6.3% as there are still concerns of deflation with weakness in the property sector continuing to drag the broader economic recovery, despite Beijing’s efforts to fuel the economy through monetary stimulus. UK FTSE 100 index dropped by 1.3% reflecting uncertainty around macroenvironment. Oil surged 4.5% in January amid conflict in Middle East and Red Sea. On the fixed income side, DJ Sukuk Index fell 0.40% after dollar strengthened and yields started upward trend as officials seemed reluctant to cut rates pre-mature. Lastly, DJ Commodity Index increased by 0.40% and Gold went down by 1.1%.

Market Snapshot

News & Key Events in January


• Annual inflation rate in the UK unexpectedly rose to 4% in December 2023 from a nearly two-year low of 3.9% in November.

• The British economy shrank 0.1% on quarter in Q3 2023, compared to initial estimates of a flat reading.


• The annual inflation rate in the US went up to 3.4% in December 2023 from a five-month low of 3.1% in November, as energy prices went down at a slower pace.

• The Federal Reserve kept the Fed funds rate unchanged at a 23-year high of 5.25%-5.5% for a fourth consecutive meeting in January 2024, in line with expectations. Policymakers added that they do not expect it will be appropriate to reduce the rates until they have gained greater confidence that inflation is moving sustainably toward 2%.

• The US economy expanded an annualized 3.3% in Q4 2023, much better than forecasts of a 2% rise, and following a 4.9% rate in Q3, according to the advance estimate.


• The inflation rate in the Euro Area went down to 2.8% year-on-year in January 2024 from 2.9% in the previous month, in line with market expectations.

• The European Central Bank kept interest rates unchanged at record-high levels during its first meeting of 2024 and pledged to maintain them at sufficiently restrictive levels for as long as necessary to bring inflation back to its 2% target in a timely manner, despite concerns about a looming recession and a gradual easing in inflationary pressures.

• The Euro Area economy unexpectedly stalled in the last three months of 2023, following a 0.1% contraction in the previous period. The common bloc avoided a recession in the end of 2023, amid a better-than-expected growth in Spain (0.6%) and Italy (0.2%) while the French economy stalled and Germany, which is the largest one, contracted 0.3%.


• China’s consumer prices fell by 0.3% yoy in December 2023, marking the third straight month of decline which was the longest streak of drop since October 2009.

• The People’s Bank of China (PBoC) maintained its lending rates at the January fixing, as the central bank continued its attempt to support an economic revival. The one-year loan prime rate (LPR), which is the medium-term lending facility used for corporate and household loans, was kept unchanged at a record low of 3.45% for the fifth consecutive month; and the five-year rate, a reference for mortgages, was held at 4.2% for the seventh straight month.

• The Chinese economy grew by a seasonally adjusted 1.0% in Q4 of 2023, but moderating from an 1.5% increase in Q3. This was the sixth consecutive period of quarterly expansion, with weakness in the property sector continuing to drag on the broader economic recovery.


• The annual inflation rate in Japan fell to 2.6% in December 2023 from 2.8% in the prior month, pointing to the lowest figure since July 2022, as food prices rose the least in 14 months.

• The Bank of Japan kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% during its January meeting, as expected.

• The annual inflation rate in Russia edged down to 7.4% in December from 7.5% in the previous month, supporting the case for the earlier interest rate cuts by the CBR.

• The annual inflation rate in Canada rose to 3.4% in December of 2023 from 3.1% in the previous month.


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