Written by Chris Ayton.
Although down in local currency terms, the MSCI All Country World Index rose +1.3% in GBP over the week and the FTSE All Share Index was up +3.8%. The Bloomberg Global Aggregate Index was down -0.8% in GBP Hedged terms.
In the UK, in a further attempt to dampen inflation, the Bank of England increased interest rates by 0.75% to 3%, the largest monthly rise since 1989. However, while bringing modest relief to homeowners, it also indicated that rates may rise less than the market expected going forward as the UK has already entered a recession. In other positive news, UK construction activity grew more than anticipated and UK new car registrations surged 26% from a year earlier, with hybrid and electric vehicles driving the rise.
In the US, the S&P 500 Index finished the week down -3.3% in local currency terms but further Dollar strength reduced the loss to -0.7% for GBP investors. The Federal Reserve also increased interest rates by 0.75%, its fourth monthly increase in a row. However, unlike in the UK, the Fed Chair Jerome Powell indicated that US interest rates are likely to peak at a higher level than expected as inflationary pressures were proving sticky, although he did note the pace of those rises to reach that peak may slow. This week’s inflation print will be closely watched.
Continental European equities enjoyed a strong week, with MSCI Europe ex-UK up +3.7% in Sterling terms. Producer Price Inflation in the Euro Area eased a little, but the reading did nothing to ease concerns around inflationary pressures across Europe, at a time of a weakening economic outlook and continued conflict in Ukraine. European Central Bank President Christine Lagarde said she still does not expect a recession in the Eurozone economy but that, even if there was, it would not be enough to stop them raising rates further to quash inflation.
In Asia, Chinese shares rebounded sharply as there were rumours of an imminent relaxation of China’s strict COVID-19 restrictions. A Chinese foreign ministry spokesman said that he was not aware of any such news, but this did not stop these unfounded rumours pushing the MSCI China Index up +14.1% over the week in Sterling terms.