An important week coming up with three big events

An important week coming up with three big events

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On Wednesday the US Federal Reserve FOMC meeting will announce its decision on rates. There are hopes that the Fed might start slowing the pace of increases after this meeting and Chairman Powell’s statement at the press conference will be closely examined for such clues.

 

On Thursday, the Bank of England will also be making a decision on interest rates. The market has been pricing in a 0.75% hike, although some analysts have begun forecasting a lower increase of 0.5%.

 

This Friday will see the release of the October US Jobs Report – a potential market mover.

 

and not forgetting that US mid-term elections are on November 8th.

 

As for last week, there was a sharp sell-off in Chinese stocks at the start of the week after Chinese leader Xi Jinping cemented his control over the ruling Communist Party. The Yuan fell sharply reaching its lowest level, relative to the US Dollar, since 2007. It did rally back but we note that today it is trading down again close to last week’s lows. Potentially the leaders of China and the US could meet at an upcoming Group of 20 summit – President Xi Jinping has encouragingly said that China is willing to work with the US to find ways to co-operate.

 

By the end of last week equity markets were generally higher with US stocks putting in a particularly strong performance on Friday after the Fed’s preferred gauge of inflation, the PCE price index, came in slightly weaker than expected at 5.1 percent. Mega-cap Tech stocks however had a rough time with Amazon, Alphabet (Google), Meta (Facebook) and Microsoft all sharply lower after earnings misses.

 

In the UK, Rishi Sunak became the third Prime Minister in 2022. Market volatility has eased a little, but Goldman Sachs thinks a “significant” recession for the UK is now likely. Chancellor of the Exchequer Jeremy Hunt will give an Autumn Statement on 17th November, one that will involve, in his words, “decisions of eye-watering difficulty”.

 

In Europe, the European Central Bank raised rates by 0.75% which lifted the Deposit Rate to 1.50%, its highest level since 2009. The press release said the ECB expects to “raise interest rates further” but did not explicitly say this would be over the next few meetings. Markets took this to mean the next hike might be smaller than previously expected and European stocks finished the week on a strong note.

 

UK Market Chart 28th October 2022

US Market Chart 28th October 2022

US Risk Barometer 28th October 2022

Europe Risk Barometer 28th October 2022

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

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