After anti-lockdown protests in China, the country significantly reduced quarantine restrictions this week, introducing 10 rules to follow on the path to reopening, including allowing individuals to isolate from home. China’s annual inflation fell to 1.6% on year in line with expectations, the lowest figure since March. The fall was mainly attributed to a slowdown in the cost of food. The Hang Seng rallied this week on the prospect of increased demand from China reopening quicker than markets had originally anticipated. As we have said all along, a country with a population of 1.4 billion and pent-up demand creates massive potential for an uptick in consumption.
Policymakers from some of the world’s largest central banks have indicated that they will start to slow the pace of interest rate hikes going forward with signs of inflation easing and growth slowing. Markets are expecting both the European Central Bank, the Bank of England and the Fed to raise rates by 50 basis points.
US producer prices, a key indicator of inflation, edged up by 0.3% month on month in November, the same as the previous month but slightly higher than market expectations which weighed on investor sentiment.