Weekly Market Wrap 25/03/2022

Inflation in the UK soars to a 30-year high, whilst consumer confidence falls to the lowest level seen since the Covid-19 pandemic. Rishi’s Sunak’s spring statement looked to help fight the UK’s cost of living crisis and delivered a damp squib and a pessimistic outlook for the UK economy. Federal Reserve Chairman Jerome Powell caused markets to price in a number of 0.50% rate hikes during 2022 after delivering a Hawkish statement on Monday. Russian forces appear to be faltering in their attempt to take Ukraine’s capital Kyiv, whilst peace talks continue to deliver no material progress. 

US Markets 

The S&P 500 gained 1.44% to 4,527 whilst the Dow gained 0.70% to 34,913. Markets opened fairly flat on Friday as investors are unsure of the next move with a lack of development in Ukraine and key movement in US interest rates. A number of major US banks are now forecasting the Federal Reserve to take a more aggressive approach to tackling high levels of inflation after Jerome Powell’s speech on Monday where he confirmed that the central bank would raise rates more rapidly if required. Investors now predict a 0.50% rate hike in the Fed’s May meeting. Additionally, the US yield curve has shown signs of flattening, a move which is typically a key indicator of a US recession.  

UK Market   

The FTSE 100 ended the week up 1.25% at 7,497. Data released on Wednesday showed that UK inflation reached its highest level since 1992 at 6.20%. Rising fuel and food prices were key contributors to the 30-year high figure, above the consensus estimates of 5.9%. Chancellor Rishi Sunak’s spring statement attempted to combat rising prices by reducing fuel duty by 5p per litre for 12 months and doubling the government’s household support fund. Retail sales data showed a surprise fall in activity in February as well as UK consumer confidence sitting at the lowest levels seen since 2020 as the Ukraine war, rising inflation and higher interest rates cause concern for UK consumers. Rishi Sunak also told parliament that estimates for UK GDP growth, downgrading the 2022 forecast to 3.8% from 6%, as well as predicting declining growth over the next four years.  

European Markets   

The Euro Stoxx 50 ended the week down 0.36% at 3,888, the DAX fell 0.22% to 14,381 and the CAC 40 lost 0.40%, ending the week at 6,594. Investors remained cautious this week as market waited for more news on the Russia and Ukraine conflict whilst defensive sectors and technology made gains on Friday. The European Union is considering following the UK and US by banning imports of Russian oil, a move endorsed by the US, who will aim to supply the EU with 15 billion cubic meters of natural gas. 

Fixed Income  

The US 10-Year Treasury yield has risen by 0.20% to 2.34% this week as Jerome Powell told investors that the Federal Reserve may have to move “more aggressively” to counter high levels of inflation. Markets now see the feds fund rate at 2.25%-2.50% by the end of the year.  

Commodities 

Brent Crude gained 8.56% to $117, reversing losses seen in the two previous weeks as potential supply issues outside of Russia emerged. The EU, which is currently the largest buyer of Russia oil is considering imposing a ban on Russian imports, a move already seen by the UK and US. This move would further increase supply concerns and possibly punish prices to even more elevated levels. 

Gold prices rose 0.77% to $1,950, with inflation measures continuing to push higher and the situation in Ukraine far from over, investors have increased allocations to the safe haven asset. 

The Week Ahead  

The Week Ahead   

Monday – BOE Governor Speech 

Tuesday – US Housing Price Index 

Wednesday – US GDP 

Thursday – UK GDP; US Initial Jobless Claims  

Friday – US Nonfarm Payrolls 

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