Global stocks rose yesterday as the markets reacted to hopes that inflation is beginning to slow and that central banks are about to take their foot off the pedal on interest rate rises, if not going into reverse just yet. The Nasdaq in the US climbed by 3.5% and the FTSE by 0.7%.
Neither rising equities nor the Bank of England’s (BoE) interest rate hike of 50 basis points to 4% was of help to sterling against the euro, however, which dropped nearly 1% in advance of the announcement, then rallied, then gently declined again. GBP/EUR now sits close to its lowest point for two years.
It comes amid a report from the IMF that the UK economy would be the only industrialised economy in recession this year, and a report from the Bank of England that broadly agreed, but if anything was more pessimistic.
Against the US dollar, sterling has weakened around 1.5% over the course of the three major interest rate announcements from the Fed, European Central Bank (ECB) and BoE. The ECB also raised its headline rate by 50bp and signalled that it would do so again next month, while the Fed raised by 25bp.
So far the euro has been the winner overall, ending the week stronger against all major rivals except for the Japanese yen (JPY) and Swiss franc (CHF), over 1.5% stronger against sterling than last Friday.
There could be more to come, however. This morning we are hearing final readings for PMI in the UK and major eurozone economies
Later today US jobs data will arrive in the form of non-farm payrolls and the unemployment rate – always a good gauge of the US (and therefore the global) economy’s health.
Apple has already reported its first decline in revenues in three and a half years, blaming supply problems from China. However, it has not, unlike other tech giants, instigated large-scale lay offs.
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