Written by Ilaria Massei.
Almost all the major equity benchmarks ended lower in a week which delivered relatively few important economic data releases. The S&P 500 closed at -0.9% in GBP terms, in a week where the Fed Chairman, Jerome Powell, held a speech at the Economic Club of Washington and communicated to markets that the disinflationary process has begun. However, according to the latest jobs report, economic conditions have not deteriorated enough to justify a reversal in the hawkish monetary policy currently applied.
In the UK, the GDP Growth rate was released last Friday and signalled that the economy stalled in the last quarter of 2022, and narrowly escaped a recession despite a sharp economic contraction of 0.5% in December. A recession is defined as GDP contracting for two consecutive quarters. Although growth for the quarter was 0%, the contraction in December was mostly due to a drop in services output and strikes affecting the country during the Christmas period.
In China, the annual inflation rate rose to 2.1%, from 1.8% in December. This was the highest reading in three months, as easing of lockdowns have increased prices. On a monthly basis, consumer prices increased 0.8% in January, following a flat reading in December 2022 and marking the steepest rise since January 2021.
Japan was the only major equity market to end the week on a positive note, with the MSCI Japan Index closing up +0.8% in GBP terms. It has been a week full of speculation around the new potential nominees to be the next governor of the Bank of Japan (BoJ). Investors are looking for a shift in monetary policy, which could be delivered by Kazuo Ueda who seems to be more cautious about the risks of an ultra-loose monetary policy.