Market Update

From the table provided, it's evident that the week concluded on a positive note for markets. This uptrend was spurred by growing beliefs that the Federal Reserve might not increase interest rates beyond current market expectations, coupled with encouraging PMI data from China.
This week witnessed China's Caixin manufacturing and services PMI outpacing market predictions, signifying a notable resurgence in growth for both domains. The General manufacturing PMI ascended to 51.6 in February 2023, from January's 49.2, surpassing the anticipated 50.2. Moreover, the General services PMI leaped to 55.0 in February, marking its most rapid expansion since August 2022. The report highlighted a significant rise in new businesses and a near four-year high in new export growth, fueled by the easing of Covid-19 constraints, bolstering consumer optimism and demand. Additionally, Japan's services PMI sector showcased its fastest growth since June 2022, registering at 54 in February, an improvement from January's 52.
Over in the US, the resilient nature of the economy initially stoked concerns regarding persistent high interest rates. However, sentiments shifted favorably on 2nd March 2023, following dovish remarks by Atlanta Fed's Raphael Bostic. He hinted at the possibility of the central bank stalling rate hikes by summer and suggested future increases might be limited to 25 basis points. This stance contrasted with other Fed officials who emphasized a data-centric approach.
The US ISM manufacturing PMI reflected continued contraction in February with a score of 47.7. Conversely, the ISM services PMI exceeded expectations, scoring 55.1, indicating stable growth. The ongoing strength of the US economy and job market places emphasis on forthcoming data like US unemployment and non-farm payrolls, essential to assessing the market's tolerance for heightened interest rates.
Turning our attention to Europe, preliminary February 2023 CPI displayed a slight dip to 8.5% year-on-year, the least since the previous May, but still exceeded the projected 8.2%. Notably, inflation surged in major Eurozone economies, including Germany, France, Spain, and the Netherlands.
These inflation metrics offer the European Central Bank (ECB) a clear picture of persistent inflationary pressures, leading investors to anticipate a continued assertive approach from the bank. The ECB's Christine Lagarde reiterated the challenge in aligning inflation closer to the 2% objective and maintained that the previously discussed 50 basis point increase in March remains on the cards.