Aug 4, 2023 1:41:08 PM
Weekly Market Wrap 04/08/2023
The UK BoE raised rates to 5.25% and US jobs growth is expected to show that the global rate hiking cycle is slowly coming to a close.
The UK markets closed down this week as the Bank of England raised rates for the 14th consecutive time, “The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target,” the BoE said in fresh guidance.
There is optimism the hiking cycle is approaching its end, however, as the 0.25% was below expectations and inflation belatedly showed signs of cooling. Housebuilders and the property sector reacting positively. The UK’s new car market recorded a full year of growth, with one new battery electric vehicle registered every 60 seconds in July. UK retail bellwether Wilko is on the brink of collapse however in further worrying signs for the high street.
The S&P 500 is set to fall by 1.75%, whilst the Nasdaq looks set to end the week 2.49% lower. Ratings agency Fitch downgraded the credit rating of the US on Wednesday, citing “a steady deterioration in standards of governance” and the American government’s growing debt burden.
U.S July Payrolls data is expected to show a slowing of job growth after almost 18 months of interest rate rises.
Th Euro Stoxx 50 is currently down 3.10% this week. European CPI data showed a continued fall in inflation this week, with the latest reading for July falling to 5.3% from 5.5% in June. This data was followed by the European Central Bank saying on Friday that underlying inflation in the euro zone has “probably peaked” pointing markets to the possibility that the ECB could pause its interest rate hikes at the September meeting.
Yields on US 10-year bonds rose to 4.18% this week, the highest level seen in 2023. The move in yields came after Fitch’s downgrade of the US government’s credit rating from AAA to AA+.
Brent crude is set for 6th week of gains, rising by 0.47% to $85.40 per barrel following moves by Russia and Saudi Arabia to cut output.
The Week Ahead
Monday – BoE’s Pill Speech
Tuesday – Germany CPI
Wednesday – China CPI
Thursday – US CPI & Initial Jobless Claims
Friday – UK GDP & US PPI
*x% up/down to price as of last week’s close