Archinomics weekly 31.01.22
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 markets whipsawed, rallying on Friday after volatility followed the US Federal Reserve (Fed) meeting. Shares in Europe fell for the fourth consecutive week, on interest rate uncertainty and rising tensions between Russia and Western Europe. Japan’s main indices were also hit by fears of tighter policy, with the high growth tech sector most impacted. Chinese equities fell sharply ahead of this week’s Lunar New Year holiday.
Bonds
US Treasury bond yields reversed their earlier climb, as prices rallied late in the week. European government bonds were generally weaker on concerns over inflation and interest rates. Investment grade corporate bonds responded negatively to the Fed meeting, although energy sector bonds outperformed. High yield corporate bonds traded lower, as the prospect of tighter Fed policy weighed on risk assets.
Currencies
The US dollar gained against all majors, while the euro weakened across the board. Sterling advanced slightly against the yen, which only managed gains against the Euro.
Commodities
The oil price touched $90 as geopolitical tensions mounted on the Ukrainian border. Meanwhile, gold and industrial metals slipped back somewhat.
Responsible investing
The UK announced that airlines would be required to fly more regularly, in order to keep their airport landing rights, prompting warnings of pollution by half empty ‘ghost flights’.
Macro
- Fed Chair Jerome Powell promised to be ‘nimble’ in the face of higher inflation, prompting forecasts of five interest rate hikes for this year.
- German Q4 GDP declined by 0.7%, hit by supply chain constraints and weaker consumer spending, while France’s Q4 GDP beat expectations with 0.7% growth.
- US Markit PMI data for January slowed to 50.8 for the composite index, the lowest level for 18 months and barely in expansion territory.
On the radar
- US January non-farm payrolls are forecast at a fairly subdued level of 155,000, with the unemployment rate unchanged at 3.9%.
- PMI data are expected to show a mild weakening after strength in the manufacturing series, due to the rapid spread of the Omicron variant.