NEWS
January 2023 on the markets
Stock markets started 2023 on a strong note with gains across global equities. China's re-opening after dropping the zero-Covid policy in late December helped push the advance. Inflation continues to ease in several major regions, further adding to market optimism as central banks may be close to the peak of their rate hiking. Global government bond yields fell in January on the inflation news. The Bank of Canada hiked rates by 25 basis points but signalled a pause in its hiking cycle, while the Federal Reserve raised their rate by only 0,25% on February 1.
US equities made solid gains in January with the Dow Jones, S&P500 and Nasdaq Composite gaining 2,83%, 6,18% and 10,68% respectively. Primarily IT and consumer discretionary stocks booked the strongest gains. Inflation cooled off for the sixth successive month in December, dropping to 6,5% from 7,1%, mainly due to lower energy and food costs. This led investors to expect slower rate increases from the Federal Reserve. Also a stronger than expected GDP growth of 2,9% added to the optimism. On the other hand the US dollar continued to decline against the Euro, closing January at 1,0862 or down 1,50%.
Eurozone shares were among the best regional performers in January with the DAX, Eurostoxx and CAC40 indices adding 8,65%, 9,75% and 9,40% respectively. Again the best performing sectors included IT and consumer discretionary, in part as a result of China’s economic reopening.
Economic growth in the eurozone however is bismall, adding just 0,1% of growth quarter-on-quarter in Q4, a slowdown from 0,3% growth in Q3. Eurozone inflation edged lower again in December but still stands at 9,2% compared to 10,2% in November. European Central Bank President Christine Lagarde warned that further interest rate rises would still be needed to return inflation to the 2% target.
Chinese shares achieved strong gains once again after Beijing loosened its Covid-19 restrictions that have hampered economic growth since early 2020. Government measures to support the country’s property market and a loosening of the regulatory crackdown on China’s technology companies also improved investor sentiment. The Hong Kong Hang Seng index gained 10,42% throughout January.
On the commodities markets, natural gas fell sharply to USD 2,684/Mmbtu or by 40%. WTI oil futures fell a modest 1,64% to USD 79,15 per barrel and gold gained 5,66% to USD 1929,5 per ounce.
Rudy Marchant
Fund manager Primorski skladi