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Week ending 30th December 2022.

3rd January 2023

Happy New Year.

Whilst it has been a horrible year for financial markets (and one that we are pleased to see the curtains finally came down on), thankfully the final week of the year was a relatively quiet one as we had no nasty surprises.

The week’s main story was the record freezing temperatures covering Canada and the US.

Fortunately, the weather across Europe turned milder after a cold start to December – and hence, lower heating demand.

As a consequence, we saw gas prices continue their recent decline:  gas contracts for delivery in February fell 10% this week, and whilst they are still elevated, they are now half the level they were in August.  This will help to ease inflation readings in the coming months – and hopefully allow central banks to pivot away from their aggressive interest rate increases.

Looking ahead to this coming week, there is plenty of economic data: in addition to the release of the minutes from the last Fed monetary meeting which was held on 14 December 2022, on Friday (6 January 2023) we have Eurozone CPI and US employment data – and given weekly continuing claims have started to rise (indicating that Americans who are out of work are starting to find it harder to find a new job), this suggests to us that the US employment market may be starting to lose momentum.

Additionally, this week we have US & UK mortgage approvals (given the fastest pace of monetary tightening in decades coinciding with the biggest squeeze in real incomes in a generation, we are likely to see mortgage approvals in both countries fall sharply); US ISM data; US factory orders; Eurozone retail sales; Chinese PMI; and China’s trade balance.

The Investment Management Team

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