Daily Market Commentary 9th May 2023

Markets sentiment remains strong, with equities rising for more than a week, in both Europe and the USA, while bond yields continue to drift lower. The surprise was the lead off from the Swedish Central Bank, Riksbank, which took the bull by the horns and cut interest rates, for the first time in eight years. Inflation in Europe has been steadily falling and they have not seen the resurgent spike, as seen in the USA. The European solution to inflation has been the age-old one, ‘tried and tested’, recession. It is working well, and Sweden has been perfect example. Sweden has been suffering dreadful economic conditions and now the Central Bank has decided, the answer is monetary stimulus, cutting rates from a relatively low 4%, to 3.75%. The Swedish recession has been extremely tough, and the state of the economy has been reflected in a steadily declining currency. Europe will be watching the results closely, with recession engulfing much of the Eurozone, while Central Banks look to diverge from the Fed, who are currently experiencing a spike in inflation, as recession approaches. The EUR held steady around 1.0750, while the GBP look to hold 1.2500.

Commodity currencies stabilised, with the NZD looking to regain 0.6000, while the AUD attempts to hold above 0.6550. Inflation has not been stamped out in these antipodean countries, while tough economic conditions endure. Local markets will be watching the Bank of Japan closely, with BoJ minutes set to be released today, while the Yen resumes its downward spiral, post-probable intervention. Big problems remain in the ‘land of the rising sun’.