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Daily Market Commentary 16th November 2023

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Global equity markets continued to rise, boosted by dramatic falls in inflation across Europe and the US. UK inflation crashed from 6.7% to 4.6%, joined by big falls in headline inflation in both France and Italy, surging market confidence that Central Bank interest rate rises have peaked. Headline inflation remains stubbornly high, which is a red flag, but recessionary conditions across Europe remain the biggest inflation killer. EU Industrial Production contracted by a massive 6.9%, reflecting the dire state of the European manufacturing sector, while US Retail Sales fell sharply. The dire economic conditions are partly due to high interest rates and partly due to flagging demand. The US Dollar stabilised, with the EUR trading 1.0840, while the GBP slipped back to 1.2420. The softer GBP was hardly surprising , considering the precipitous falls in headline inflation, but the Bank of England may not be so bullish.

Japanese GDP numbers were shocking, with Q3 contracting 2.1%, sharply lower than expected. Japanese Industrial Production also contracted a massive 4.4%, which triggered the Yen to fall sharply to 151.20. Economic conditions are not great in the ‘Land of the rising Sun’, which will only encourage the Bank of Japan to maintain extremely stimulative monetary policy settings. Commodity currencies held onto previous gains, with the AUD regaining 0.6500, while the NZD charged through the ‘BIG’ figure of 0.6000. The weak Japanese economic data was somewhat offset by strong Chinese Industrial Production and Retail Sales numbers. 

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