This week the two main drivers of financial markets this year were both in focus: inflation and what central banks are doing about it. Initially there was some good news as inflation in both the US and the UK dropped more than expected. While still far too high, there is at least some hope that we’re over the worst. Inflation in goods is easing the most, with some areas, like used cars, seeing deflation. However, labour intensive services, like restaurants and hairdressers, are still putting prices up. This has convinced central banks that if they’re going to put inflation to bed then they’re going to need to cause some unemployment.

With that in mind, the US Federal Reserve, the Bank of England and the European Central Bank increased interest rates. They all gave very stern speeches about how it was a long road ahead and not to get too carried away on early signs of slowing inflation. Stock markets took this at face value and fell following the announcement. Bond markets are much more sceptical and are forecasting rate cuts before the end of 2023.

For the following stories, please click on this link*

• Inflation – Falling energy prices help to ease inflation
• Rates – Markets looking for signals that rate hikes will end
• UK – Jobs market showing first signs of cooling

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

The price of oil fell to its lowest in 2022 as markets factor in the effect of the global economic slowdown. China has lifted some Covid restrictions but weak trade data means markets don’t expect an immediate recovery of Chinese demand. Further signs that the global economy is slowing and expectations of recession in developed economies has seen the price of oil drop around 20% over the last month. Brent crude has fallen from $95 a barrel in early November to $77 this week.

The OPEC+ cartel agreed to maintain current production targets after it cut output by 2 million barrels a day in October but these cuts failed to prop up the oil price. This week also saw the EU and G7 agree a price cap of $60 a barrel for Russian oil exports. Russian oil already trades at that level so the cap had no immediate effect on oil prices. Russia says it will refuse sales below the cap but it needs to find buyers to replace lost European sales. This will determine if the cap succeeds and if there will be a long-term impact on oil prices.

For the following stories, please click on this link*

• US – US job market remains strong, but other economic data continues to weaken
• Global– Wall Street warns that US recession is likely in 2023
• Equities – Airlines show signs of recovery but outlook is bumpy

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

Protests against China’s strict anti-Covid restrictions have sparked volatility in Chinese equities. After two years of the government’s severe zero-Covid policy protests have rapidly spread across the country after rising infections caused some local authorities reimpose the country’s harsh restrictions. Chinese equities fell at the start of the week before rallying strongly as the government showed the first signs of loosening restrictions. Senior officials said the country can move to a new phase of the fight against the coronavirus due to better vaccination rates and a weaker strain of the virus.

For the following stories, please click on this link*

• Markets – Looking for the positive as China hints at easing Covid restrictions
• Global – Markets rise as the Fed signals rate hikes will slow
• Equities – Utilities face greater regulatory intervention

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)