Zurich Weekly News – Feb 12th 2023

Markets grind higher in quiet trading week
It was a relatively quiet week in the markets, with activity across the main asset
classes remaining muted. The lack of macro data releases meant there was little
new developments to trigger material moves in markets. The S&P 500 Index
finished above 5,000 for the first time ever on Friday as investors continue to bet
on the resilience of the US economy, with unemployment low, inflation largely under
control, and the Federal Reserve’s fabled ‘soft landing’ very much in sight. The S&P
is up about 5.4% so far this year, and has set six new highs in January, with most of
the gains coming from the Magnificent Seven. However, on a more cautionary note,
the equal weighted version of the index has barely moved and remains below alltime highs set in 2021.
In the eurozone, retail sales fell by 1.1% in December. Following the November
growth of 0.3%, the December figure is disappointing, suggesting Europeans are
feeling the cost-of-living pinch. The fall was larger than the consensus forecast of –
0.8%. These results arrive against a backdrop of cooling but persistent inflationary
pressures. Inflation for the whole euro area slowed to 2.8% in January. Germany
showed a sharp slowdown in retail sales with a 1.6% decline.
With Germany being the largest economy in the eurozone it wields a significant
influence on the single currency bloc’s overall inflation. Headline German CPI came
in at 2.9% YoY in January. The last time inflation was lower than this was June 2021.
Additionally, German HICP rose to 3.1% YoY in January. This figure was in line with
market expectations. There is still one more inflation release to consider before the
ECB’s March meeting, but the numbers for January increase confidence that their
first-rate cut may not be until at least April.
In Asia, China’s CPI fell by 0.8% YoY in January, the most in more than 14 years and
worse than the market’s expectation. It was the fourth straight month of CPI decline
in China. Core consumer prices, which exclude food and energy prices, increased
by 0.4% YoY in January, the softest rise since last June.
Our regular market information continues on the next page.
Fact of the Week
Japan’s Nikkei hits 34 year high – on track to surpass all-time record for the first
time since 1989.