Market Commentary 13th March 2023 from Will Binks

UK economic data was more positive than anticipated, with Gross Domestic Product (GDP) expanding by 0.3% in January. The UK prime minister, Rishi Sunak, stated that confidence is returning to the economy.

A Purchasing Managers’ Index (PMI) indicated that activity in the construction sector expanded at the fastest rate since last May, with commercial and civil engineering projects having the largest contribution. Residential building activity contracted as increased interest rates have dampened demand.

The Consumer Price Index (CPI) in Germany rose by 8.7% year on year in February 2023, not far from the peak of 8.8% in November 2022. Increases in energy prices slowed, but this was offset with a sharper increase in the cost of food and services.

An initial estimate for economic growth within the Euro Area indicated GDP increased 1.8% in the last quarter of 2022, despite battling with record inflation and increased costs of borrowing. Other economic data within Europe showed that unemployment reduced by 1.5% year on year, whilst retail trade declined by 2.3% in the year up to January 2023.

The number of job openings within the US fell by 410,000, with the largest decreases in construction, accommodation and food services. The amount of American citizens filing for unemployment benefits rose by 21,000 to 211,000 over the week ending the 4^th March 2023.

Silicon Valley Bank, the 16^th largest bank in the US and the largest banking provider to the technology companies in the Silicon Valley area collapsed on Friday. It is the biggest bank to fail since the 2008 financial crisis, the US government announced over the weekend that it would protect ‘all depositors’ at the Silicon Valley Bank.

Official data showed the Chinese Consumer Price Index (CPI) slowed to a rise of 1.0% year-on-year in February 2023, its lowest level since February 2022. Core inflation, which strips out food and energy prices, came in at a lower 0.6%. Imports into China fell 10.2% year on year overall, despite imports from Russia jumping 31.3%.

The Bank of Japan met last week as the departing Governor, Haruhiko Kuroda, declared his ultra-loose monetary policy a success as they voted to keep short term interest rates at -0.10%. The Japanese Yen and the 10-year government bond yield both fell immediately following the decision.

Data released throughout the week contributed to the 10-Year Gilt yield remaining fairly stable, but yields declined significantly on Friday as investors moved to safer assets following the collapse of the Silicon Valley Bank.

GBP / EUR – Current  1.1306 Previous 1.1327

The Pound declined by 0.04% and 0.18% against the Dollar and Euro respectively across the week. The Dollar was volatile with a good start to the week, but ended on a weaker note amidst news of Silicon Valley Bank.