Daily Market Commentary 22nd February 2023

US and European equity markets lost ground overnight as global bond yields march higher. Markets await the release of the Fed minutes overnight and expectations are for further pain. The Fed is expected to hold the line, on their tightening of interest rates, especially since the hotter than expected US CPI/PPI last week. Bond yields have been quietly creeping higher, over the last couple of weeks, and Central Bank policy should ensure they continue to rise. European and US PMI numbers were flat with rises in Services, negated by weaker than expected, Manufacturing data. European and German ZEW Economic Sentiment was higher, but failed to impress market sentiment. The EUR drifted back to 1.0640, while the GBP managed to regain 1.2100.

The RBA minutes revealed their was a consideration of a 50 basis point rise at their last meeting, but members considered they may be reaching ‘peak inflation’. That is brave assumption, that has come back to bite Central Banks, across the globe. Australian PMI was slightly stronger than expected, while Japanese was weaker, with manufacturing contracting sharply. Local markets await the RBNZ latest rate decision, in which they are expected to raise rates by 50 basis points, despite the devastation of the cyclones. The stronger bond yields have driven the reserve higher and the NZD fell back to 0.6200, while the AUD crashed back to 0.6850.  Keep an eye on the RBNZ and the Fed.