Midweek Trading Update

TPP Midweek Trading Update:

FTSE 100 on the front foot as Bank of England speech leads to lower rate forecasts.

·       FTSE 100 climbs 0.5%

·       UK manufacturing data improves, inflation pressures ease

·       Bank of England boss says 'nothing is decided' on interest rates yet

Traders Trim Bets for Peak in Bank of England Rate This Year:

Going into the Bailey’s speech this morning, expectations for peak rates were running at fever pitch after a big shift globally in recent days. But traders interpreted his comments as lacking conviction, which saw money markets trim about 10 basis points off the previously expected peak.

They are still pricing about an additional 75 basis points of increases though.

European markets were cautiously higher this morning after data showed an increase in German harmonized inflation in February.

The Stoxx 600 index traded slightly higher through the morning and was up 0.18% at 3 p.m. in London. Mining stocks powered ahead, up 2.8%, while utilities dropped 1.5%.

Euronext, the European stock exchange operator, was among the top performers, gaining 5% after announcing it had dropped its 5.5 billion euro offer for investment platform Allfunds.

Economic data continues to be at the fore, after releases on Tuesday showed inflation in France and Spain accelerated unexpectedly in February.

A German flash estimate put the inflation rate harmonized with the rest of the EU at 9.3% in February, which would be an increase from 9.2% in January. Euro zone inflation figures are due Thursday.

Italy’s statistics office reported full year GDP growth of 6.8% and PMI figures showed French manufacturing output declined after a strong performance in January, but the picture was brighter in Italy and Spain.

U.S. equity futures were little changed this morning after a rise in early European trading, as bond yields continued their climb and traders tried to recover their footing following a losing month.

The Dow opened around 32,550 (-0.33% down), the S&P500 3960 (-0.25%) and the Nasdaq at 12030 (-0.09%). Nothing major but the sentiment in the US does seem to be dragging the rest of us down with it.

Futures pared early gains as bond yields continued their climb, with the 1-year yield rising above 5%, and after the benchmark 10-year yield reached its highest level since November on Tuesday.

Sentiment initially got a boost after the release of much stronger-than-expected data out of China. The country’s National Bureau of Statistics said its official manufacturing PMI rose to 52.6 in February — a high not seen since April 2012.

Hong Kong’s Hang Seng index rose 4.15% – leading gains in the region and the Hang Seng Tech index climbed 6.5%. In mainland China, the Shenzhen Component rose 1.1% to close at 11,914.32, and the Shanghai Composite finished 1% up at 3,312.35.

The S&P/ASX 200 was down marginally to close at 7,251.6 after Australia’s economy for 2022 grew 2.7% on an annualized basis.

In Japan, the Nikkei 225 climbed 0.26% to close at 27,516 and the Topix was 0.23% up at 1,997.81 as factory activity in February shrank at its fastest pace more than two years, a private survey showed.

The moves come after Wall Street closed out a losing February for stocks on Tuesday. The Dow led the averages down, closing the month down 4.19%. The S&P 500 and Nasdaq Composite shed 2.61% and 1.11%, respectively.

February’s slide dragged the Dow into negative territory for the year and it’s now down 1.45%. The decline marked a turn from January’s rally which was short lived as the market realised, nothing much had changed from the end of 2022.

The big questions right now for most investors , are:

Where do the markets go from here?

How are you positioned to take advantage of the market climate?

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