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Weekly Market Wrap 24/02/2023

Consumer confidence in the UK improved in February, despite ongoing food shortages. Estimates for UK inflation continue heading lower, whilst the latest FOMC minutes give investors clues around how the Fed may move at its upcoming monetary policy meetings. The German economy is on the verge of a recession as Eurozone inflation surprised to the upside. 

UK Market  

The UK market ended the week lower. UK consumer confidence increased by more than expected in February, rising to -38 from -45 in January, the biggest increase in more than 2 years. Optimism around personal finances may have been boosted by expectations that inflation in the UK could rapidly decline throughout 2023. Following the Bank of England’s projection that UK inflation could fall to 4% by the end of the year, a number of financial institutions have released predictions that see UK CPI at or even below the 2% target before the end of 2023. It is thought that falling energy costs and lower commodity prices will be key drivers of lower inflation. The UK is experiencing shortages for a number of fruits and vegetables, with a number of supermarkets having to limit sales per customer. The reason behind the shortages is extreme weather conditions in areas where these items are imported from, as well as reduced output from domestic farmers due to higher energy costs. 

US Markets 

The S&P 500 is currently ending the week down 1.64% at 4,012 and the NASDAQ is up 1.44% at 12,180. The Federal Reserve released minutes from its latest policy meeting, with persistently high inflation still the key issue for policy makers. Minutes revealed that most members supported the recent 25bps hike, whilst a number of participants favored a 50bps increase in the February meeting. This information reinforces the view that the Fed is committed to tackling inflation and rates will continue to push higher. The market is currently pricing in 3 more interest rate increases at the next three Fed meetings, which would take rates to the 5.25-5.50% range.  

European Markets 

The Euro Stoxx 50 is currently down 0.95% at 4,234, the DAX is 0.58% lower at 15,392, whilst the CAC 40 has fallen 0.91% to 7,280. The Germany economy fell by 0.4% in the fourth quarter, Q1 2023 also looks weak as the country is on the brink of a technical recession as inflation and the energy crisis took their toll on household consumption and capital investment. Eurozone inflation surprised to the upside and was marginally higher in January as core inflation was lifted. Bundesbank President Joachim Nagel noted that the European Central Bank may still need to raise interest rates significantly beyond March as inflation remains too high.  

Fixed Income  

Yields on the US 10-Year rose this week to 3.90% as continued hawkish sentiment pushes interest rate expectations higher.  


Brent Crude was flat this week at $82 per barrel, gaining slightly on Friday as Russia looks set to cut exports by up to 25% in March, more than the previously announced 500,000 barrels per day.   


The Week Ahead   

Monday European Consumer Confidence 

Tuesday – US Consumer Confidence  

Wednesday – US Manufacturing PMI 

Thursday – EU CPI & US Initial Jobless Claims 

Friday – European PPI  

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