Market Update

The past week was eventful with the Fed, BoE, and ECB conducting their monetary policy meetings. Global equity markets responded positively to their decisions, as evident from the related table.
On 1st February 2023, the Fed took a measured approach by raising the interest rate by a mere 0.25%. The Fed Chair, Jay Powell, highlighted that US inflation is on a decline. While Powell didn't dismiss potential rate hikes, given that they won’t be revising December's economic forecasts until their 22nd March 2023 meeting, it seems the current phase of Fed tightening is nearing its conclusion. Considering the latest US employment statistics on 3rd February 2023, where payrolls surged by 517,000 (way above the anticipated 188,000), causing the unemployment rate to drop to 3.4%, it's plausible that the Fed might make only one or two minor hikes. Furthermore, with the US ISM Services reading showing an uptick to 55.2 from December’s 49.2, it indicates a potential for a stable economic trajectory, given that a reading above 50 indicates growth.
The onus then shifted to the BoE on 2nd February 2023. As anticipated, the UK saw a 0.5% rise in interest rates, reaching 4%. However, the decision wasn't unanimous as two out of the nine members preferred retaining the rates at 3.5%. This suggests that BoE's current phase of tightening may soon come to an end.
The ECB, which also convened on the same day, raised Eurozone interest rates by 0.5%. Of the three, the ECB appeared the most assertive, planning for another 0.5% hike in their upcoming March meeting, even though inflation seemed to have calmed.
The upbeat sentiment in equity markets was further fueled by encouraging corporate earnings. A case in point is Meta (the parent company of Facebook, Instagram, and WhatsApp), which saw its shares soar by 22.9% over the week, following an optimistic statement and a revelation about a $40bn share buyback.