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Review 22Jan - 26Jan24: Equities Surge as Central Banks Hold Steady: Europe Leads with Strong Data and Corporate Performance

At their policy meetings, the Bank of Japan, Bank of Canada, and the European Central Bank all maintained their policy rates unchanged as inflation approaches their targets. While the Bank of Canada and the ECB are paving the way for the start of rate reductions, the Bank of Japan is preparing for potential rate increases in upcoming meetings. Equity markets reacted positively to these decisions, with a particularly strong performance by European equities, buoyed by economic data that mostly exceeded expectations. In terms of US equity sectors, Energy was the biggest winner, gaining 5%, as oil prices surged over 6% week-over-week. Conversely, the consumer discretionary sector declined by 1.8%. Bitcoin rebounded above $40,000 after briefly dipping to $38,500. Yield curves generally steepened, driven by lower short-term rates and stable or slightly higher long-term rates. The USD was overall marginally stronger, showing significant gains against Scandinavian currencies but weakening against the GBP. The Pound Sterling was bolstered by another set of strong economic data, reinforcing the recent positive trend and diminishing the likelihood of imminent rate cuts. Key data releases of last week:

  • BoJ Stays Pat, Signals Potential Policy Shift in Near Term (read more here)

  • Australian Business Confidence Improves Slightly But Conditions Remain Weak (read more here)

  • Japan's Trade Balance Swings to Surplus Upping Expectations for Q4 Growth (read more here)

  • Green Shoots for Manufacturing in Europe? (read more here)

  • Bank of Canada Maintains Rate at 5%, Signaling Potential Conclusion of Hike Cycle (read more here)

  • US Business Activity Surges, Signaling Economic Resilience Amid Labor Shortages (read more here)

  • IFO Business Outlook Sours (read more here)

  • US Growth Keeps Surprising, Tops Forecasts in 2023 (read more here)

  • ECB Holds Steady, Yet Lagarde Signals Potential Shift in Rate Policy by Summer (read more here)

  • Contrasting Consumer Confidence: UK Surges as Germany Stumbles Amid Political Strife (read more here)

  • US Core Inflation Continues its Descent, While Consumer Spending Remains Brisk (read more here)

  • CFTC Leveraged Money Positioning Update for the Week to Jan16 (read more here)


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