Global Markets Update Monday, 6 March 2023

The UK and EU announced they had reached agreement on replacing the trading protocols for Northern Ireland. The Windsor Framework involves creating green and red lanes through which goods will pass. The green lane, that will see minimal checks, is designed for goods that will only be sold in Northern Ireland; the red lane will be used for goods that may also pass into the republic of Ireland. The deal received broad-based approval although the DUP and Eurosceptic-ERG are still pouring over the small print.


The FTSE 100 advanced 0.9% over the week.

Bank of England governor Andrew Bailey suggested markets were wrong to believe many more rate rises would be necessary to tame inflation although “some further increase” may be appropriate.


The S&P 500 rose 1.5% over the week.

Federal Reserve policymakers made a series of statements signalling the need to keep US interest rates high for longer amid concerns that hotter-than-expected inflation data and more resilient economic data could fuel price pressures.

The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) rose to 47.7 in February. The ISM non-manufacturing PMI came in at 55.1 in February, higher than forecast.

US durable goods orders rose 0.8% over the month of January, a stronger outcome than had been expected.

Tesla shares dropped after it failed to specify when a new model would launch or what it might cost.


The Eurofirst 300 gained 1.4% over the week.

ECB president Christine Lagarde warned that inflation will remain “sticky in the short term” and signalled that further eurozone interest rate rises are very likely as “inflation is a monster that we need to knock on the head”. ECB officials also warned that rates may need to hit 4% unless they see ‘clear signals’ that core price pressures are easing.

German inflation accelerated to an annual rate of 9.3% in February, up from 9.2% in January.

French consumer prices rose 7.2% in the year to February, the second consecutive monthly acceleration and the highest rate since the euro was launched in 1999.

The annual rate of increase in Spanish consumer prices also accelerated for the second consecutive month of growth in February, hitting 6.1%, despite the government cutting food taxes in January.


The Nikkei 225 rallied 1.7% over the week.

Pacific Basin

At the National People’s Congress, China set an economic growth target of “around 5%” for 2023. This compares to a target of “around 5.5%” for 2022 (actual growth of 3%) and is the lowest target in more than three decades. President Xi Jinping is using the congress to undertake sweeping changes to his administration, installing loyalists to senior government jobs and centralising power further.

China’s official manufacturing sector PMI jumped to 52.6 in February, up from January’s 50.1 and the highest level since April 2012.

Emerging Markets

The MSCI EM Index slid 0.7% over the week in USD terms.

Brazil’s economy shrank 0.2% in the fourth quarter of 2022, driven by shrinking industrial output and a cooling of services sector activity.

Turkey’s economy grew 5.6% on an inflation-adjusted basis in 2022 thanks to buoyant consumer spending.

Pakistan’s central bank raised lending rates by 300 basis points to 20% as it struggles to contain rising prices and a deepening financial crisis.


The yield on the 10-year US Treasury bond rose 3bps over the week to close at 3.99%, having traded above 4% mid-week. The yield on the two-year US note hit 4.94%, its highest since 2007, before closing the week at 4.88%. The yield curve (2s to 10s) is the most inverted in 42 years as futures markets indicated the federal funds rate will peak at about 5.5% in September.

The yield on the 10-year German Bund rose 17bps over the week to close at 2.71%. German two-year bond yields rose to 3.20%, their highest level since the 2008 financial crisis.

The yield on the 10-year UK Gilt rose 34bps over the week to close at 3.99%.