Weekly Market Wrap 28/07/2023

Strong economic data has raised the likelihood that a recession could be avoided in the developed world as the US and EU raised interest rates by 0.25% as expected this week.

UK Market  

The UK market ended the week higher as key company earnings come in above expectations.

The Bank of England looks likely to raise rates by a quarter-point to 5.25% next week, though markets see a risk of a repeat of June’s surprise half-point hike as inflation remains comfortably above other major economies.

 US Markets

The S&P 500 is set to end the week flat at 4,537 and the NASDAQ is up 0.25% at 15,464. The Federal Reserve raised interest rates in the US as expected this week, taking rates to the 5.25-5.50% range. Markets are currently pricing in no further interest rate increases for the US, as inflation continues to make strides towards the target rate, whist core inflation also pushes lower. US GDP data surprised to the upside this week, show 2.4% annualized growth in Q2 of 2023, significantly ahead of the 1.8% economist consensus.

 European Markets 

The Euro Stoxx 50 is currently up 1.13% at 4,043, the DAX is 1.53% higher at 16,425, whilst the CAC 40 has gained 0.36% to 7,459. The European Central Bank delivered a ninth consecutive interest rate this week as expected, increasing the ECB’s deposit rate by 0.25% to 3.75%. When asked about a potential hike at the bank’s meeting in September, ECB President Christine Lagarde told reporters “It’s a decisive maybe.”, as inflation within the Eurozone continues to ease, whilst the risk of the region falling into recession grows. European CPI data will be released on Monday, where inflation is expected to continue falling. Economists predict the latest reading to falling to 5.2% from 5.5% in June.

 Fixed Income

Yields on 10-Year US government bonds rose by 0.17% this week to 4.00% as continued strong economic data raises the likelihood that a recession could be avoided.

 Commodities

Brent Crude is up 3.60% this week, as demand expectations remain strong with a number of major central banks now being expected to have reached peak rates, whilst US GDP data shows a resilient economy.

The Week Ahead

Monday – European GDP & CPI

Tuesday – US Manufacturing PMI

Wednesday – US Employment Data

Thursday – BoE Interest Rate Decision & US Initial Jobless Claims

Friday – US Wage Inflation

*x% up/down to price as of last week’s close