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09 January 2024

Market Round-Up

The United Kingdom witnessed a monumental shift in its electricity generation in 2023, with a 20% reduction in its coal and gas usage. This decline takes us back to levels from over six decades ago, to 1957, when Harold Macmillan was the UK Prime Minister.

Climate and energy website, Carbon Brief, attributed the fall to an increase in renewable energy sources, compounded by a long-term trend of decreasing demand and higher electricity imports from France and Norway. Better efficiency, higher prices and a changing economy have all been significant factors in amplifying this fall in demand.

Last year, renewable energy provided the largest source of power to the grid, standing at a hefty 42% of the mix, compared to a 31% contribution from gas power stations and 1% from coal. Though still a third of the input, over the past 15 years the reliance on coal has dropped by a staggering 97% and gas by 43%. Considering that the country’s population has surged from 51 million in 1957 to 67 million in 2023 and there is greater demand for electricity, this change underscores the ongoing pivot away from fossil fuels towards a more sustainable and eco-conscious future.

In December 2023, China saw its services sector rapidly expand, according to the Caixin Purchasing Managers Index (PMI) survey. This survey collates data from purchasing managers across China to demonstrate the month-on-month changes and trends in the sector and indicate the country’s overall economic health.

The Caixin survey showed the index rising to 52.9 in December, above the 50-point threshold that splits expansion from contraction, and higher than the forecast of 51.6 that was predicted by analysts at Bloomberg. This increase means the country has experienced an expansion in activity for 12 consecutive months, demonstrating the resilience of its service sector compared to other areas of the economy. Analysts project that there is a possibility that growth may continue over the next quarter, since policymakers have been enacting various stimulus measures to boost confidence in the economy. 

However, the Caixin survey diverged from the findings of the official survey by the National Bureau of Statistics. Instead, the official survey indicated a contraction within a sub-index of the services sector at the end of 2023. Analysts attribute this disparity to the variance in the geographic and sector representation, but it could also suggest that the economy may still be under pressure to boost confidence even further, and that the outlook for 2024 is still unclear. In recent months, analysts have been downbeat when discussing China's economic landscape, particularly in regard to its lagging property sector. In December Moody's the US-based rating agency, downgraded the country's A1 credit rating from stable to negative.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance.
Market Round-Up

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