Archinomics weekly 10.01.22
Architas (Now AXA IM Select)
Now a member of the AXA Investment Managers family and is now formally known as the business unit, AXA IM Select
Equities
US equity markets fell sharply, after the minutes of the December meeting of the US Federal Reserve (Fed) indicated a faster pace of interest rate rises. The Nasdaq underperformed significantly. European indices held up better overall, with strong performances from the UK and Italy. In Japan the TOPIX index made slight gains on the weaker yen, as Covid restrictions were boosted. Chinese indices tumbled, as the property crisis rolled on.
Bonds
Government bond markets were rattled by the prospect of tighter monetary conditions. US Treasury yields climbed at the sharpest rate for more than 28 months, as prices fell. The German Bund yield approached 0%, having been negative for almost three years. Spreads drifted wider for both investment grade and high yield bonds, in response to risk off sentiment.
Currencies
Sterling made gains against all majors, while the yen was generally weaker. The US dollar only improved against the euro, which lost ground against all except the yen.
Commodities
Oil prices rose sharply on hopes for rising demand as Omicron fears faded, despite the agreement by OPEC to increase production levels for the seventh consecutive month.
Responsible investing
France started its six month presidency of the EU, promising to prioritise a carbon tax on imports from countries whose industries are not obliged to adopt green technologies.
Macro
- FOMC minutes from the Fed’s December meeting set a more hawkish tone, increasing speculation that interest rate hikes could begin as early as March.
- US December non-farm payrolls came in at 199,000, against expectations of 400,000, while the unemployment rate fell to 3.9%.
- US ISM December surveys turned in weaker data for both the Manufacturing and Services sectors, although commentary suggested that supply constraints might be easing.
On the radar
- Inflation data from across the globe will be closely analysed for clues as to the likely pace of interest rate rises.
- China export and import data could shed light on any easing of supply chains.