Global equity markets, particularly those containing small and medium sized companies rallied strongly last week as optimism that central banks had reached the end of their tightening cycle gathered momentum. The FTSE 250 surged by +6.6% whilst the Russell 2000 index in the US jumped by +7.0% in what was its best weekly performance for over a year. The moves came after both the Federal Reserve (Fed) and Bank of England (BoE) voted to keep their respective base interest rates unchanged. A subsequent retracement in sovereign yields was also supportive of equity markets with the 10-year gilt (UK) and equivalent duration treasury (US) falling by 11 basis points (bps) and 8bps respectively.

Amongst the major indices, the S&P500 was particularly strong as it closed the week +5.9% higher. Growth companies, notably those in the technology sector enjoyed strong gains although advances were seen across most sectors [1]. In Europe, the FTSE 100 added a more modest +1.7% whilst the MSCI Europe ex UK index rose by +3.6%. Gains in the main UK market were hampered by the advance of Sterling due to the bulk of its companies being exposed to overseas earnings. Elsewhere, the Nikkei 225 in Japan rose by +3.1% whilst the Chinese Shanghai Composite recorded a +0.4% gain. Weak Purchasing Manager Index (PMI) data and disappointing new home sales in its embattled property sector both weighed on investor sentiment.

Moving to commodities, oil prices retreated for a second straight week having risen sharply in the immediate aftermath of the Hamas attack on Israel a month ago. Brent crude declined by -2.0% to $90.43 a barrel despite ongoing concerns that military activity could broaden out around the Middle East. Copper prices remained volatile although they ultimately posted a weekly increase of +1.9%. As for gold, the precious metal fell slightly to $1,982 an ounce, a decline of -0.6%.

Week Ahead

Source: Refinitiv Workspace, 06/11/23

[1] T. Rowe Price – Global Markets Weekly Update 03/11/23

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