US stocks and bond yields slid after investors reassessed their projections for US interest rates following the far stronger-than-expected jobs growth in January.

UK

The FTSE 100 eased 0.2% over the week.

The UK economy flatlined over the fourth quarter, with GDP falling 0.5% in December alone. The public sector strikes show no signs of abating.

The UK Treasury and Bank of England are designing a digital pound that could replace bank notes by the end of this decade.

US

The S&P 500 dropped 2.1% over the week, while the Nasdaq lost 4.0%.

Stronger-than-expected jobs data for January has caused investors to rethink forecasts for future interest rates. Investors now expect rates to peak slightly above 5% in July, with only one interest rate cut by year-end, compared to a peak of around 5% in May, with two interest rate cuts by the end of 2023, prior to the non-farm payroll data.

Federal Reserve chair Jay Powell has warned that the US central bank might have to raise interest rates more than investors expect because it will probably take a “significant period of time” to tame inflation given stronger labour market data.

The University of Michigan US consumer sentiment index jumped to a thirteen-month high of 66.4 in February from 64.9 in January.

Shares of Google parent Alphabet fell after a technology glitch in its new artificial intelligence software during a live demonstration.

Europe

The FTSEurofirst 300 slid 0.6% over the week.

German inflation slowed to a five-month low of 9.2% in January from a year earlier, but a delay in the data may means that the eurozone-wide figure of 8.5% for the month is revised upwards.

Eurozone retail sales declined 2.7% in December, the biggest monthly fall since April 2021.

Japan

The Nikkei 225 rose 0.6% over the week.

Emerging Markets

The MSCI EM Index declined 2.0% in USD terms over the week.

Turkey suffered a massive earthquake near its border with Syria on Monday. Trading on Turkey’s benchmark Bist 100 was subsequently suspended for five days after a steep fall in share prices.

Bonds

The yield on the 10-year US Treasury bond rose 20 bps over the week to close at 3.72%. The yield on the two-year note rose to 4.52%, meaning the inversion between yields on two- and 10-year yields hit the deepest level since 1981

The yield on the 10-year German Bund closed the week up 17 bps at 2.36%.

The yield on the 10-year UK Gilt closed the week 34 bps higher at 3.39%.

Currencies

The Japanese yen strengthened on news of that academic Kazuo Ueda would likely replace ultra-dovish Haruhiko Kuroda as the new governor of the Bank of Japan.

Commodities

Oil prices advanced slightly following Russia’s announcement that it would cut its monthly oil output in response to a price cap imposed by western nations.