Please see below article received from Brooks Macdonald this morning, which provides a summary of market movements around the globe.
What has happened
The equity market rally continued apace yesterday as the Bank of England and ECB concluded their policy meetings and risk appetite enjoyed the post Powell press conference glow. US equities hit a 5-month high and the US technology index was a small margin away from entering a bull market (defined as a 20% rally from its lows). US equity futures are pointing to a less positive day today however as Apple, Alphabet and Amazon all disappointed analyst expectations after the closing bell.
Bank of England
Yesterday, the Bank of England and ECB raised rates by 50bps, in line with expectations, but their narratives were quite distinct. While the Bank of England raised rates by 0.5%, two members dissented, backing a smaller move. Within Threadneedle Street, there is a growing feeling that the UK economy will struggle with the cumulative impact of interest rates, and for that reason, bond markets expect this to be the last outsized hike before a downshift to 25bps and a pause over the summer.
ECB
Before yesterday’s meeting, European bond markets were volatile as investors tried to reconcile better data, falling inflation, and lower energy prices with a hawkish central bank. The market had already priced in a 50bp hike and a good chance of another in March, but the ECB’s terminal rate is expected to be only 3.25%, much lower than the Bank of England and Federal Reserve. The ECB is expected to maintain its hawkish narrative, as they are further from restrictive territory than the US and UK, who have already raised interest rates. That said, investors thought that yesterday’s meeting did contain some more dovish overtones with the ECB committing to ‘evaluate the subsequent path of monetary policy’ after March’s anticipated 50bp rate hike.
What does Brooks Macdonald think
With this week’s central bank meetings now done, investors will now be myopically focused on inflation data in the coming weeks. In the US, they will also be looking for signs of shrinking wage price inflation, which is an important gauge for the Fed. The positive for markets this week is that central banks have made it clear that if inflation fades faster than they expect and more in line with financial market expectations, they will react and pivot. This only makes the CPI releases even more important than they already were. The speed at which inflation fades in the US, Eurozone, and UK will drive financial markets for the rest of 2023
| Index | 1 Day | 1 Week | 1 Month | YTD | |||||
| TR | TR | TR | TR | ||||||
| MSCI AC World GBP | 1.7% | 3.3% | 7.6% | 8.2% | |||||
| MSCI UK GBP | 0.5% | 0.5% | 4.4% | 4.4% | |||||
| MSCI USA GBP | 2.0% | 4.2% | 7.6% | 8.1% | |||||
| MSCI EMU GBP | 2.3% | 3.4% | 10.8% | 12.6% | |||||
| MSCI AC Asia Pacific ex Japan GBP | 0.8% | 0.7% | 8.4% | 8.9% | |||||
| MSCI Japan GBP | 0.9% | 2.0% | 5.5% | 5.9% | |||||
| MSCI Emerging Markets GBP | 0.7% | 0.4% | 7.6% | 8.1% | |||||
| Bloomberg Sterling Gilts GBP | 2.7% | 2.2% | 5.4% | 5.4% | |||||
| Bloomberg Sterling Corps GBP | 2.3% | 2.1% | 6.4% | 6.4% | |||||
| WTI Oil GBP | -0.2% | -5.3% | -6.6% | -6.6% | |||||
| Dollar per Sterling | -1.2% | -1.5% | 1.5% | 1.2% | |||||
| Euro per Sterling | -0.5% | -1.7% | -0.8% | -0.8% | |||||
| MSCI PIMFA Income GBP | 1.3% | 1.6% | 5.0% | 5.1% | |||||
| MSCI PIMFA Balanced GBP | 1.4% | 1.9% | 5.5% | 5.6% | |||||
| MSCI PIMFA Growth GBP | 1.3% | 1.9% | 5.8% | 5.9% | |||||
| Index | 1 Day | 1 Week | 1 Month | YTD | |||||
| TR | TR | TR | TR | ||||||
| MSCI AC World USD | 1.2% | 2.2% | 9.3% | 9.5% | |||||
| MSCI UK USD | 0.1% | -0.6% | 5.7% | 5.7% | |||||
| MSCI USA USD | 1.5% | 3.1% | 9.4% | 9.4% | |||||
| MSCI EMU USD | 1.8% | 2.4% | 12.6% | 14.0% | |||||
| MSCI AC Asia Pacific ex Japan USD | 0.3% | -0.3% | 10.2% | 10.2% | |||||
| MSCI Japan USD | 0.4% | 0.9% | 7.2% | 7.2% | |||||
| MSCI Emerging Markets USD | 0.3% | -0.7% | 9.4% | 9.4% | |||||
| Bloomberg Sterling Gilts USD | 2.5% | 1.7% | 7.7% | 7.7% | |||||
| Bloomberg Sterling Corps USD | 2.0% | 1.6% | 8.8% | 8.8% | |||||
| WTI Oil USD | -0.7% | -6.3% | -5.5% | -5.5% | |||||
| Dollar per Sterling | -1.2% | -1.5% | 1.5% | 1.2% | |||||
| Euro per Sterling | -0.5% | -1.7% | -0.8% | -0.8% | |||||
| MSCI PIMFA Income USD | 0.8% | 0.6% | 6.7% | 6.4% | |||||
| MSCI PIMFA Balanced USD | 0.9% | 0.8% | 7.2% | 6.9% | |||||
| MSCI PIMFA Growth USD | 0.8% | 0.9% | 7.5% | 7.1% | |||||
| Bloomberg as at 03/02/2023. TR denotes Net Total Return | |||||||||
Please check in with us soon for further updates.
Adam
03rd February 2023