Equity markets continued to rally as rate hikes were announced in line with expectations and comments were made that the process would soon slow down. Rate-setters also highlighted the resilience of economic activity despite the restrictive effects of monetary policy.

Bond yields fell at the beginning of the week but ended the week flat. The US 10-year yield is around 3.5% and the German equivalent is close to 2.20%.

In the US, economic activity is slowing and inflation is easing. However, non-farm payrolls added 517,000 jobs in January, well above expectations. Looking at the private sector figures, job creation slowed to 106,000, below the 180,000 expected. Initial jobless claims fell to 183,000 in the week to 23 January from 186,000 the previous week. The unemployment rate fell 0.1 percentage point to 3.4% and average hourly earnings rose at an annual rate of 4.4%, slightly stronger than expected.

Durable goods orders (excluding transport) fell by 0.2% in December.

In Europe, economic doubts and energy shortages led to a sharp decline in German retail sales in December, which fell by 5.3% compared with a forecast increase of 0.2%.

The acceleration in consumer prices in France, from 6.7% in December to 7% in January according to harmonised European Union data, following the announcement of higher inflation in Spain, reinforced the ECB’s determination to continue raising interest rates at upcoming meetings.

The S&P 500 ended the week up 1.62%, while the tech-heavy Nasdaq rose 3.31%. The Stoxx 600 Europe Index gained 1.23%.

The corporate earnings season will continue this week and could lead to renewed volatility.

Source: Bonhôte

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