Despite a volatile trading week, the FTSE 100 has risen 0.7% at the time of writing, trading at around 7,950. Investors have had to absorb a flurry of economic data from around the world, but notably in the UK. The domestic residential property market continues to look weak as higher mortgage interest rates impact demand for new housing.
The rate of borrowing dropped to £2.5bn in January 2023 vs a consensus of £2.95bn, down from £3.1bn in December 2022. Approvals also fell for the fifth month in a row. The Nationwide Housing Pricing Index also showed a greater than expected drop in property prices both MoM (-0.5% vs -0.4% expected) and YoY (-1.1% vs -0.9% expected).
Later in the week, the FTSE 100 was buoyed by positive news from China. Tight COVID restrictions continued to be loosened, thus driving aggregate demand for heavyweight materials and energy higher. This prompted bullish bets on the export-oriented leading UK equity index.
US equity markets
In the US, futures eased on Friday following comments from The Federal Reserve Bank of Atlanta President Bostic’s comments, which improved sentiment. He said he supported a quarter-point rate hike and signalled the possibility that the central bank may pause rates in summer. These comments come at a time when the US labour market remains tight. Data on Thursday showed US Jobless claims fell unexpectedly to 190,000, down 2,000 from last week and lower than market expectations of 195,000.
Futures indicate the Dow is expected to rise 0.1% whilst the S&P 500 and NASDAQ 100 are up 0.3 and 0.5% respectively.
International equity markets
The Chinese Purchasing Managers Index, which serves as an indicator for business conditions, climbed to 55 points in February 2023, up from 52.9 in the previous month. This data points to the fastest pace of expansionary activity since August 2022.
The consumer price inflation in the Euro Area was revised slightly higher to 8.6 percent year-on-year in January 2023, up from a preliminary estimate of 8.5 percent and well above the European Central Bank’s target of 2.0 percent. Still, the rate eased to the lowest level since last May, due to a slowdown in energy inflation (18.9 percent vs 25.5 percent in December).
Commodity markets
Commodity markets have broadly been strong due to the continued re-opening of the Chinese economy. This bullish sentiment has outweighed concerns of further monetary policy tightening from the US Federal Reserve. Brent Crude now trades at $84 per barrel, up 1.4% this week.
Gold has bucked its downward trend, which had characterised most of its performance for February, and is now up 1.5% on the week, standing $1835 per troy ounce at the time of writing.
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