The noise
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UK CPI fell to 10.5% in the year to December from 10.7% in November, falling for a second month but remaining at some of the highest levels in 40 years. Despite overall inflation falling, the annual rate of price growth for food and drink climbed to 16.8%, the highest level since 1977. Although cooling inflation is a positive, the Bank of England is still expected to raise interest rates in early February.
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The US Government hit its $31.4 trillion debt ceiling on Thursday, amid tensions between the new House of Representative majority Republicans and President Biden’s Democrats on lifting the ceiling. The Treasury has started using special measures to avoid a default, altering payments to two government retirement funds.
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Big Tech continue their job cutting as Amazon and Microsoft announce fresh layoffs. Microsoft said it would cut 10,000 jobs in Q1 while Amazon says it expects to lay off 18,000 people. This comes amid over two dozen US based tech companies having reported they’ll be cutting their workforce by 10% or more, as tech executives blame misreading the post pandemic economy and over optimism.
The numbers
The nuance
For over a decade the US stock market has regularly outpaced the rest of the world, driven mainly by delivering superior earnings growth. While market observers often highlight that US stocks are more expensive, this has been overpowered by the earnings growth. This year started with some optimism that consumer price inflation had peaked for now, and so bond yields can retreat driving up prices. While the sceptre of recession still hangs over the equity market, the expectation of future interest rate cuts is helping to boost equities.
The interesting part is that the US dollar, overvalued after last years persistent strength, has been weak this year, and also that the US stock market has been the weakest region. With US stocks accounting for nearly 70% of the global stock market, this means that broad based equity strength is not reflected in global indices and if it continues, provides good stock picking opportunities for active investors.
Quote of the week
“Almost like a football with legs”
Kylee Gray, National Park Ranger
A giant cane toad, weighing 2.7kg has been discovered in Australia. The amphibian shocked rangers as they stumbled across the ‘monster’ in Conway National Park, North Queensland.
Ranger Kylee Gray said her team were blown away by the size of the toad. While being interviewed by the Australian Broadcasting Corp, she described it as the largest toad she had ever seen and said it looked “almost like a football with legs”.
The cane toad dubbed “Toadzilla” will be sent to the Queensland museum for measurement and weighing, checking to see if it could be the largest toad found. Currently the Guinness World Record for the largest toad in history is 2.65kg, set by a pet toad in Sweden 32 years ago.
Cane toads are not native to Australia, having been introduced to the country from their native South and Central America in 1935. They have since become one of Australia’s most damaging pests, with an estimated two billion causing havoc down under.