Global Markets Update Monday, January 2023

The IMF signalled an upgrade to its economic forecasts for the second half of 2023 and into 2024. The upgrade has been driven by China ending its zero-COVID policy, US support for green investment and lower recessionary risk in Europe as natural gas prices fall.


The FTSE 100 lost 1.0% over the week.

GfK’s consumer confidence index slipped to -45 in January from -42 in December.

UK retail sales in the UK sank 1% month on month in December, following an upwardly revised 0.5% drop in November.

UK inflation eased marginally to 10.5% in December, from 10.7% in November, although food inflation remained rampant.

UK wages rose 6.4% in the three months to November compared to the same period a year earlier (both including and excluding bonuses). Private sector wages were up 7.2%, while public sector wages rose 3.3%.

Britishvolt collapsed into administration after rescue talks failed.


The S&P 500 slid 1.0% over the week, although the Nasdaq rose 0.3%.

Lael Brainard, vice-chair of the Federal Reserve, said “it will take time and resolve” to get “high” inflation back down to the US central bank’s target of 2%.

US retail sales fell 1.1% year on year drop in December.

The rate of US new home construction fell to a five-month low in December as higher mortgage rates weighed on demand.

Microsoft and Alphabet announced they would lay off tens of thousands of workers.


The FTSEurofirst 300 closed the week unchanged.

European Central Bank president Christine Lagarde said “we shall stay the course until…we can return inflation to 2% in a timely manner.”

German producer price inflation slowed to 21.6% in December, down from 28.2% in November and the lowest level since November 2021.

The ZEW Institute’s index of German investor sentiment rose for the fourth successive month to 16.9, from minus 23.3 in December and the highest level since Russia’s invasion of Ukraine.


The Nikkei 225 rallied 1.7% over the week.

Japan’s core inflation rate rose to a new 41-year high of 4.0 in December. Energy prices were a main driver of the increase, increasing 15.2%, but core core inflation, which excludes energy, hit a 30-year high of 3.0%.

Nevertheless, the Bank of Japan defied market pressure and maintained its ultra-loose monetary policy, arguing that wage growth was not strong enough to sustainably achieve its inflation target.

Pacific Basin

China’s economy grew by 3.0% over 2022, with Beijing’s strict zero-COVID policy causing GDP growth to lag the official target of “about 5.5%”. GDP growth was flat in the fourth quarter as tight restrictions were suddenly loosened, causing infection levels to surge. Nevertheless, the data was better than many had feared.

Also in China, retail sales dropped 1.8% year on year in December, better than November’s 5.9% decline, while industrial output rose 1.3%, slowing from the 2.2% growth rate recorded the previous month.

Emerging Markets

The MSCI EM rallied 1.0% over the week in USD terms.

Brazil and Argentina are planning to create a common currency. Other Latin American nations will be invited to join. The move should eventually create the world’s second-largest currency bloc after the euro.


The yield on the 10-year US Treasury bond rose 2 bps over the week to close at 3.49%.

The yield on the 10-year German Bund closed at 2.17%, an increase of 3 bps over the week.


The US dollar index touched a seven-month low as expectations of sharp Federal Reserve rate rises eased. Meanwhile the euro has rallied, helped by falling natural gas prices and a reduced recession risk.


Brent crude rose to almost US$88 a barrel on optimism that China’s reopening would boost fuel demand.