Global equity markets faced heavy selling pressure last week as fears that the Federal Reserve (Fed) may move more aggressively on rates to combat inflation gathered momentum. There is a growing expectation that the Fed may lift rates by 50 basis points (bps) at its March policy meeting with potentially 100bps of upwards moves carried out by the end of 2022 . Developments along Ukraine’s border with Russia also weighed on investor sentiment with the latter continuing to build up its military presence.
The S&P500 in the US saw the sharpest downwards fall with the index retreating by -5.7% in what was a shortened trading week due to the Martin Luther King holiday. The Technology sector continued to face heavy selling pressure, noticeably Netflix whose shares dropped by -20.0% after its Q4’21 earnings report. On the Continent, the German DAX and French CAC40 declined by -1.8% and -1.0% respectively whilst in the UK, downwards moves in the FTSE100 were somewhat more muted with the main domestic market falling by -0.7%.
Moving to the sovereign bond markets, yield moves were volatile as the week progressed. The US 10-year Treasury yield hit 1.90.% on Wednesday in what was its highest level since 2019 before retreating the following day on weaker jobless claims data. It ultimately finished the week at 1.75%, a 2bps reduction over the previous week. The equivalent duration UK gilt yield rose by 2bps to 1.75% whilst the 10-year Eurozone benchmark index fell by a single basis point to -0.06%.
Concluding the week with commodities, oil prices continued to march higher with Brent Crude climbing by a further +2.1% to $87.95 a barrel. Over the past three months alone, Brent has risen by nearly +19.0%. Copper also enjoyed upwards momentum last week as it edged closer to the $10,000 a tonne mark; the metal rose by +2.6% to $9,984. Gold meanwhile increased by +0.6% to $1,832 an ounce despite a rise in the value of the US Dollar. 
Flash PMI figures covering the first three weeks of January are published in the UK this week with the latest public sector borrowing data released a day later. PMI data has already been announced in the Eurozone with the rate of growth deteriorating for the Services sector whilst Manufacturing benefitted from an acceleration. Later this week, preliminary Q4’21 GDP is due from the Likes of German, Spain and France.
In the US, Wednesday’s Federal Reserve meeting will receive plenty of attention given recent development in financial markets. In terms of data, Q4’21 GDP is the standout figure to keep an eye on (Thursday) whilst several key figures from the housing sector are due, notably new and pending home sales. Durable goods orders are also released later in the week. Moving to Asia, the Bank of Japan publishes its preferred measure of Core CPI in the early hours of Tuesday morning. There are no major figures due from China on this occasion. 
 T. Rowe Price 24/01/22
 Refinitiv, 24/01/2022
 Forex Factory 24/01/2022
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