Financial Markets Daily Report
18 January 2023

Risk appetite continued to set the tone on Tuesday, as investors shrug off data showing GDP stalled in China in Q4, mixed results from some US banks during the Q4 earnings season and hawkish messages from some ECB officials.

FMDR
  • Risk appetite continued to set the tone on Tuesday, as investors shrug off data showing GDP stalled in China in Q4, mixed results from some US banks during the Q4 earnings season and hawkish messages from some ECB officials.
  • In particular, in an article in the Financial Times, ECB Chief Economist, Philip Lane, said interest rates will have to move into «restrictive territory» to bring inflation back to target. By contrast, an article by Bloomberg reported that some ECB officials may be considering slowing the pace of rate hikes as soon as March.
  • Earlier this morning, the Bank of Japan left unchanged its policy interest rates as well as the parameters of its yield curve control strategy, a move that triggered a depreciation in the Yen relative to peers.
  • Elsewhere, sovereign bond yields fell amid reduced concerns among investors about the path of policy interest rates ahead. In addition, equity prices rose modestly across Europe but were mixed in the US, while oil prices ticked up.
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