Please see below article received from Brooks Macdonald yesterday afternoon, which provides a succinct but detailed global market update.
- Equities rose last week despite the risks of the US defaulting on its debt obligations
- President Biden and Republican Speaker McCarthy are set to meet at the White House to continue negotiations
- This week sees the release of the US Federal Reserve’s (Fed) preferred inflation measure as well as the UK’s inflation numbers
Equities rose last week despite the risks of the US defaulting on its debt obligations
Equity markets rose last week as investors shrugged off the impending US debt ceiling deadline, focusing on a constructive earnings season and the likelihood that the US has already reached its peak interest rate for this economic cycle.
President Biden and Republican Speaker McCarthy are set to meet at the White House to continue negotiations
Despite the fact there is still no final deal, and Republican negotiators walked out of talks on Friday, last week saw growing optimism that the US political leadership would find a compromise arrangement to avoid defaulting on US obligations. This helped equity markets to rise after trading in a tight range over the last month given concerns around the US debt ceiling and US regional banks. President Biden and House Speaker McCarthy are set to continue debt ceiling talks at the White House later today. Over the weekend there was a phone call which pointed to a more constructive tone than one would have imagined from the walkout on Friday. With Treasury Secretary Yellen warning that the chances were ‘quite low’ that the US could meet its obligations from mid-June, the stakes are high even if the mood music appears more favourable.
This week sees the release of the Federal Reserve’s preferred inflation measure as well as the UK’s inflation numbers
This week will see the release of the Personal Consumption Expenditure (PCE) inflation data series in the United States. This is the Fed’s preferred inflation measure and will be a major consideration when the Fed meets to determine the US interest rate in June. The University of Michigan will also release its final survey readings on Friday which include the medium-term consumer inflation expectations. The preliminary readings showed that consumer expectations for 5-10 year inflation had risen significantly (2.9% to 3.2%) which if confirmed in the final reading would be a concern to the Fed that is trying to keep expectations closely anchored to its 2% target. The latest UK inflation numbers will come on Wednesday with the market expecting a sharp fall from last month’s 10.1% year-on-year rise to 8.2%. Core inflation is expected to remain quite sticky however, falling from 6.2% to 6% year-on-year.
Despite US, and global, inflation remaining higher than policy makers would have hoped, the market still considers a pause in US interest rates as the most likely outcome. On Friday Fed Chair Powell said that ‘we can afford to look at the data and the evolving outlook to make careful assessments’, indicating that the Fed is in no rush to raise rates given that there is a lag between their previous hikes and the impact on the economy.
Please check in again with us shortly for further relevant content and news.
Chloe
23/05/2023