Data puts the less-aggressive-Fed theme in doubt

Data puts the less-aggressive-Fed theme in doubt

Markets rallied last week after comments from Fed Chair Jerome Powell indicated the pace of interest rate hikes might slow. In a speech on Wednesday he said “The time for moderating the pace of rate increases may come as soon as the December meeting” while at the same time warning that conditions would require “holding policy at a restrictive level for some time.” Stocks rallied and the yield on the 10yr Treasury Note fell below 3.5% for the first time since September.

However, better-than-expected US jobs data released on Friday, showing that 263,000 jobs were added in November, and data released today (Monday) showing that US ISM Services PMI rose in November, are both indications of a resilient economy and this has thrown investor’s expectations of a less aggressive Fed into doubt. Stocks are lower today.

In Europe, ECB President Christine Lagarde gave no cause for optimism on the interest rate front, saying it was likely that inflation in the eurozone hadn’t peaked yet and may even accelerate in the months to come.

In the UK last week, the housing market appears to be slowing sharply with mortgage approvals falling more-than-expected in October and a data from Nationwide indicated a fall in prices in November of 1.4%.

UK Market Chart 2nd December 2022

US Market Chart 2nd December 2022

US Risk Barometer 2nd December 2022

Europe Risk Barometer 2nd December 2022

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