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Archinomics Weekly - Monday 24th January 2022

4 months ago

the
MARKETS

Equities

It was a volatile week for US equities, as the Nasdaq briefly hit correction territory and Q4 earnings fell short of forecasts. European indices were hit by expectations of rising interest rates. Japanese indices were weaker as the government reimposed a quasi-state of emergency in key areas. In China, markets were firmer as monetary policy was eased and the government promised further support for the property sector.

Bonds

The yield on the US 10 year Treasury bond hit 1.9%, its highest level since before the pandemic, before falling back as bond prices rose on weaker jobless claims. In Europe the German Bund yield briefly moved above 0% for the first time since May 2019. Investment grade credit markets saw good demand for issuance from some US banks, while high yield markets were subdued by broad risk off sentiment.

Currencies

The yen strengthened against all majors, while sterling weakened across the board. The euro only succeeded in making ground against sterling, as it also weakened slightly against the dollar.

Commodities

Oil prices touched levels not seen since 2014 on supply concerns, as geopolitical tensions rose. Gold rose 1% in response to rising inflation expectations.

Responsible investing

European Central Bank (ECB) president Christine Lagarde committed to ‘greener’ changes to all the bank’s operations, which could include using the €2.8 trillion asset purchase scheme in the fight against climate change.

MACROECONOMIC
UPDATE

Eurozone December inflation hit a record high at 5%, while UK inflation touched a thirty year high at 5.4% for the same month.


The People’s Bank of China cut its mortgage lending rate for the first time in two years, while the ECB reiterated there would be no change to policy rates in 2022.


President Xi of China warned of ‘serious negative spillovers’, if Western economies perform a U-turn on monetary policy in the face of rising inflation.

on the
RADAR

The January meeting of the US Federal Reserve will be closely observed for commentary on inflation and interest rates.


Flash PMI data from around the world are expected to show an Omicron hit, mainly impacting the services sector.

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