UK claimant count change rose to 11.8k, Chinese industrial production grew 6.8% y/y

Weekly Update | 19th January, 2024
Hue Frame

Frame Funds Management

Let’s hop straight into five of the biggest developments this week.

1. UK claimant count change rose to 11.8k

The UK labour market performed better than expected in December despite longstanding headwinds. While the claimant count change rose to 11.8k from the previous downward revised figure of 0.6k, the rise was much less than the gloomy 18.1k markets expected. It remains to be seen if the festive over-performance was merely seasonal or if this is a sign of structural resilience moving forward.

2. Canada’s trimmed CPI rose to 3.7% y/y

Inflationary pressure in Canada is on an upward trajectory and more endemic than previously estimated. In the twelve months to December, the trimmed CPI rose to 3.7% from the previous 3.5%. This came as a surprise to markets that had priced into a reduction to 3.4%. Economic analysts will be forced to review their interest rate cut expectancy for 2024 as price elevation in Canada remains a work in progress.

3. Chinese industrial production grew 6.8% y/y

The post-Covid-19 recovery of the turbulent Chinese industrial sector is slowly gaining momentum. Industrial production grew 6.8% in the year to December, beating pessimistic market forecasts of 6.6%. We interpret this to show that the stimulus policies of Chinese authorities are beginning to take effect on industrial output, albeit slowly. 

4. UK CPI rose 4% y/y

Inflation in the UK is more widespread than initially thought. CPI rose 4% in the year to December from the previous reading of 3.9%. This was a deviation from market expectations of a further slowdown to 3.8%. Rising energy prices largely underpin the resurging inflationary pressure.

5. US retail sales rallied 0.6% m/m

The US retail sector grew for a third consecutive month to mark a solid end to the festive season. Retail sales grew 0.6% in December, outperforming the previous figure of 0.3%. The American consumer remains undaunted by restrictive monetary policies.

As per usual, below shows the performance of a range of futures markets we track. Some of these are included within the universe of our multi-strategy hedge fund. 

*source finviz
*source finviz

The VIX rose markedly on heightened geopolitical risk after Iran and Pakistan traded missiles. These hostilities renewed market fears of a regional outburst. The energy complex held strong from supply chain disruptions, most exporters re-routed ships from the critical Red Sea route. Demand soared after a 2.2million barrel shortfall in US stockpiles. Sugar rose on supply concerns that the ongoing El Nino weather pattern will adversely affect production while cocoa was up on seasonality. Natural gas, cereals, and orange juice fell on oversupply, while livestock rebounded on favorable and improving weather.

Here is the week's heatmap for the largest companies in the ASX.

A dismal week for the ASX as most sectors have experienced large losses. The financial sector was better than most, posting mixed results that leaned to the downside. SGP and SCG led the selling to close down – 5.99% and – 5% respectively. MPL and SUN propped the index to counter the selling pressure with relative strength, closing up +2.43% and +2.34% respectively. Nonenergy miners were a total bloodbath with all but one stock in the red. MIN and S32 led the wipeout to close – 7.95% and – 6.96% respectively. JHX held out with a meagre +0.09% gain. Healthcare, retail, and technology services were all red while transportation and energy miners were mixed.

Below shows our proprietary trend-following barometer which captures the number of futures contracts within our universe hitting new short and long-term trends.

*source Frame Funds Research
*source Frame Funds Research

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This information is prepared by Frame Funds Management Pty Ltd (ACN 608 862 442) (Frame Funds, we or us) is a Corporate Authorised Representative (CAR No. 123 9068) of Primary Securities Limited (ACN 089 812 812 635) and is intended only for "wholesale clients" within the meaning of sections 761G and 761GA of the Corporations Act 2001 (Cth). This material is not intended to constitute advertising or advice (including legal, tax or investment advice) of any kind. These materials are not to be distributed to any person who does not qualify as a wholesale client and must not be copied, reproduced, published, disclosed or passed to any other person at any time without the prior written consent of Frame Funds. Primary Securities Ltd (ACN 089 812 635 635, AFSL 224 107) is the Trustee of, and issuer of units in, the Frame Futures Fund and the Frame Long Short Australian Equity Fund (Funds). In deciding whether to acquire, or to continue to hold, units in the Fund please read the current Information Memorandum available from Frame Funds. Past performance of the Funds is not a reliable indicator of future performance. The value of an investment in the Funds may rise or fall. Returns are not guaranteed by any person. Total returns are calculated before tax and after ongoing management costs. In preparing this information, we have not considered your investment objectives, financial situation or personal circumstances and therefore the Funds may not be suitable for you. Neither Frame Funds, Primary Securities Ltd, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. Any rates of return, forecasts or estimates contained in this publication are not guaranteed. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

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Hue Frame
Frame Funds Management

Hue Frame is the founder of Frame Funds Management. Frame Funds is a quantitative funds management company, that manages assets for institutional and wholesale clients, and proprietary funds.

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