Weekly Market Wrap 11/02/2022

The UK economy rebounded strongly in 2021, despite the impact of the Omicron variant of Covid-19, however the outlook may not look as bright. Data released this week has shown US inflation rising by 7.48%, the fastest pace in 40 years, fueling fears of significant interest rate increases. Hawkish sentiment returned to the ECB as President Lagarde said raising rates would not reduce inflation.

US Market 

The S&P 500 is largely unchanged at 4,498 this week, despite continued intraday volatility, whilst the Dow gained 0.62%, climbing to 35,326. Markets continue to assess the impact of inflation and when it may peak coupled with how quickly the Federal Reserve will increase rates to tackle it.  

UK Market 

The FTSE 100 ended the week up 1.92% at 7,660. The index was boosted after several constituents reported strong earnings and data released on Friday showed that the UK economy grew by 7.5% in 2021. UK GDP rebounded the fastest of any G7 country. However, GDP is still below pre-pandemic levels after falling 9.4% in 2020. Despite the strong growth seen in 2021, last week the Bank of England reduced its GDP growth forecast for 2022 to 3.75% down from 5%, with an increase in the cost of living seen as a key threat to future growth.

European Markets                                                                    

The Euro Stoxx 50 gained 1.87% this week, reaching 4,162 whilst the DAX rose 2.38% and the CAC 40 gained 1.03%. On Friday morning European shares sold off after US inflation data that was higher than estimated heightened fears that the Federal Reserve could raise rates faster than previously expected. However, rate hike concerns were muted after European Central Bank president Christine Lagarde said on Friday that raising rates now would only hurt the economy.

 Fixed Income

The US 10-Year Treasury yield rose above 2% for the first time since July 2019 and is up 0.087 percentage points at 2.003%. US Treasuries continue to be sold off, a move induced by the high inflation print.

Commodities

WTI Crude was largely unchanged at 90.9, as EIA inventory came in with a drawdown. Russia / Ukraine tensions continue to weigh on the sector; demand remains strong.                                                     

The Week Ahead  

Monday – Japan GDP

Tuesday – Euro Zone GDP, UK Unemployment; RBA Meeting Minutes

Wednesday – UK CPI; China CPI; US Retail Sales; UK Retail Sales; Canada CPI; FOMC

Thursday – US Initial Jobless Claims; Australia Unemployment

Friday – Canada Retail Sales; UK Retail Sales; Swiss Industrial Production

*Price changes as of last week’s close unless stated otherwise.