Markets and <br/>investment update

Markets and
investment update

INFLATION FEARS ABATE FURTHER
JANUARY 17, 2023


WHAT YOU NEED TO KNOW

For a detailed overview of our 2023 Market Outlook, please click here.


MARKETS AT A GLANCE

Markets
Up two weeks in a row
  • Equities continued to rebound across the board, with emerging markets outperforming their developed peers (which also saw gains) so far in 2023.  
     
  • Sovereign bonds drifted lower on softening inflation in the US, France, and Spain. 
     
  • The US dollar softened across the board on better risk sentiment, with the euro gaining the most. 
Central banks & inflation
Moving in the right direction
  • US CPI inflation in December fell to 6.5% in line with expectations, largely driven by energy costs. 
     
  • Several Fed speakers have hinted at a potential slowdown in the pace of rate hikes. Markets cemented their view of a 25-bps hike, though given ongoing labour market strength, a half-point hike in February is still a possibility. 
     
  • Chinese consumer inflation rose to 1.8% driven by higher food costs, although core inflation is muted at only 0.7% (year-on-year).  
Economy
A better winter than initially feared
  • The University of Michigan consumer sentiment rose further in January 2023, the highest since April 2022. Both current conditions and expectations improved while the year-ahead inflation expectations fell for the fourth straight month. 
     
  • In the Eurozone, industrial production rose 1.0 % m/m, showing signs of resilience following a sharp decline in October 2022. Germany, the Eurozone’s biggest manufacturer, saw its economy expand 1.9 % in 2022, which may mean it avoids a winter recession.  
     
  • UK GDP edged up 0.1% m/m in November driven mainly by services activity. 
     
  • China’s imports and exports contracted again in December. However, China has now fully reopened, which should propel domestic demand. 


WHAT WE ARE WATCHING