Market Update

What an eventful week it has been. While the US held its midterm elections, the most significant moment for financial markets occurred on Thursday, November 10, 2022, with the release of the US CPI inflation data.
Headline US CPI came in at 7.7%, which was considerably lower than economists' expectations of 7.9% and a notable drop from September's reading of 8.2%. The core reading, which excludes volatile items like food and energy, also surprised on the downside, registering at 6.3%, lower than anticipated.
This slowdown in inflation solidifies our belief that the peak inflationary pressures are now in the rearview mirror. Consequently, global equity markets reacted positively, surging on the expectation that the Federal Reserve will not only begin to ease its current monetary tightening but might even consider rate cuts next year.
The positive sentiment received a further boost from today's release of US consumer sentiment data, which added to the evidence of a decelerating US economy. This reinforced the narrative that the Fed has room to slow down its current tightening measures. Additionally, the news of China easing some of its coronavirus restrictions, particularly the relaxation of quarantine requirements for secondary contacts, fueled speculation that this signals the beginning of the end for China's strict Covid-Zero policy. This implies that China may soon transition to a more common approach to living with the virus, aligning with the rest of the world.
Looking ahead to the coming week, there are significant events on the horizon. President Joe Biden is scheduled to meet with his Chinese counterpart, Xi Jinping. In the UK, Chancellor of the Exchequer Jeremy Hunt will finally provide us with a fiscal update, which has been eagerly awaited.