Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Markets declined last week, as US inflation data renewed fears of higher interest rates. The FTSE closed down 1.32% for the week. The S&P 500 ended down 2.66%. One exception was China, which finished up 0.66% for the week, as the Central Bank continues to provide support. Bond markets were also weak on renewed concerns about inflation and interest rate rises.
The US Federal Reserve’s preferred gauge for tracking inflation rose 0.6% from December to January – the largest month-to-month increase since last June. The bigger-than-expected rise in the Personal Consumption Expenditures Price Index weighed on stocks, as it puts more pressure on the Fed to continue lifting interest rates to try to control inflation.
The European Commission President will travel to the UK in a bid to strike a deal overhauling Northern Ireland’s trading arrangements, as the two sides attempt to settle a bitter dispute that has overshadowed post-Brexit relations. Ursula von der Leyen will meet UK Prime Minister Rishi Sunak in Downing Street.
Although Japan’s inflation rate remains low relative to rates in other major developed economies, its latest monthly inflation figure spiked to the highest level in four decades. Core inflation rose to 4.2%, excluding costs for fresh food. It marked the tenth consecutive month that Japan’s inflation exceeded the 2.0% target set by the nation’s central bank.
January’s US Central Bank meeting minutes released last week revealed that almost all US Federal Reserve officials had supported the step down in the pace of interest rate hikes to 0.25%. Participants also stated that further increases might be necessary before data could confidently point towards inflation slowing to the 2% target rate.
The oil price fell more than 3% for the week to around $74 per barrel, as lingering concerns about a recession-driven demand slowdown offset prospects of tighter global supplies. Hotter-than-expected US economic data fanned concerns of more Federal Reserve interest rate hikes that could weigh on demand at a time when inventories continue to rise.
A group of French NGOs, including Friends of the Earth and Oxfam France, announced that they have launched a lawsuit against global bank BNP Paribas, targeting the bank’s financing for new oil and gas projects. According to the NGOs, the aim of the legal action, described as the first-ever climate lawsuit against a commercial bank, is “to force BNP to implement an effective climate policy and to immediately stop supporting the development of fossil fuels.”
This week, in the UK, Nationwide housing prices will be in the spotlight. It will be a busy week in Europe, with investors waiting for key reports on inflation and employment for the Eurozone. The annual inflation rate in the Euro Area is expected to fall to a nine-month low of 8.2% in February, and the jobless rate is seen steady at 6.6%. In the US, we will have company earnings from Salesforce and Zoom.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, Marlborough’s Multi-Asset Investment team, T.Rowe Price, John Hancock, Morningstar, PIMCO, Trading Economics, and ESG Today.
Risk Warning: These are Nathan’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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