Money Matters 08 March 2023

Stocks rise following strong economic data

All major indices finished in the green last week as comments from a Federal Reserve official eased fears of faster interest rate rises.

The FTSE 100 grew 0.9% following growth in the services sector. The services purchasing managers’ index (PMI) rose to 53.5 in February from 48.7 in January, the first time in six months that it exceeded the 50.0 mark that indicates expansion.

European markets were also aided by positive services PMI figures. The Dax added 2.4% and the Stoxx 600 grew 1.4%.

Over in the US, indices rose as Atlanta Fed president Raphael Bostic indicated the next interest rate increase may only be 25 basis points. The S&P added 1.9%, the Dow grew by 1.7% and the Nasdaq rose by 2.6%.

Meanwhile in Asia, Japan’s Nikkei 225 gained 1.7% as core consumer inflation eased after surging to a four-decade high. China’s Shanghai Composite and Hong Kong’s Hang Seng added 1.9% and 2.8%, respectively, as the pace of growth in China’s services sector rose sharply in February, exceeding forecasts.

Last week’s market performance*

• FTSE 100: +0.87%
• S&P 500: +1.90%
• Dow: +1.75%
• Nasdaq: +2.58%
• Dax: +2.42%
• Hang Seng: +2.79%
• Shanghai Composite: +1.87%
• Nikkei 225: +1.73%
• Stoxx 600: +1.43%
• MSCI EM ex Asia: +1.36%

* Data from close of business on Friday 24 February to close of business Friday 3 March.

Stocks mixed as investors eye Fed update

US and UK stocks were mixed on Monday (6 March) as investors awaited a speech from Federal Reserve chair Jerome Powell and new US non-farm payrolls data. The FTSE 100 slipped 0.2% whereas the major US indices added around 0.1%. European stocks closed in the green despite the European Central Bank’s chief economist stating that the bank would likely need to raise interest rates further after next week’s hike. The Stoxx 600 added a marginal 0.02%, while the Dax gained 0.5%.

In economic news, UK construction sector activity hit its highest level in a year last month, as the S&P Global/CIPS UK construction PMI jumped to 54.6 in February from 48.4 in January. The result exceeded an expected 49.1 and represents the fastest growth since May 2022. However, housebuilding activity fell for the third consecutive month following a drop in demand due to declining house prices.

UK mortgage approvals slump

Figures released last week showed UK mortgage approvals fell to the lowest level since 2009 in January (excluding the early pandemic period). A total of 39,600 mortgage applications for house purchases were approved compared to 40,500 in December, the fifth consecutive monthly drop, according to the Bank of England.

UK mortgage approvals (thousands)

Source: Refinitiv Datastream

Remortgaging figures, which capture remortaging with a different lender only, also fell to 25,400 in January from 26,200 in December, the lowest level since July 2012. The effective interest rate on new mortgages rose to 3.88% from 3.67% the previous month, while the rate on outstanding mortgages rose to 2.54%. Net mortgage lending fell from £3.1bn to £2.5bn in January.

Separate figures from Nationwide showed annual house price growth fell by 1.1% in February to its lowest level since November 2012. This was the first annual decline since June 2020. Prices decreased 0.6% month-on-month, the sixth consecutive monthly decline. The average price of a property is now just over £257,400, a 3.7% decline from the peak recorded in August.

US home sales rise MoM

Over in the US, pending home sales surged by 8.1% month-on-month in January, the biggest increase since June 2020. The National Association of Realtors attributed the growth to falling mortgage rates at the turn of the year. However, rates are again on the rise: 30-year fixed-rate mortgages, the most common in the US, averaged 6.6% last week, up from 6.5% the week before. On an annual basis, pending home sales fell by 24.1%.

Meanwhile, new mortgage and remortgaging applications each fell 6.0% week-on-week, with refinancing seeing an annualised drop of 74.0%.

China’s manufacturing activity surges

China’s manufacturing sector saw a sharp increase in growth in February, expanding at the fastest pace in over a decade. The official manufacturing PMI rose to 52.6 from 50.1 in January, far exceeding forecasts of 50.5, and the highest result in over a decade, according to the National Bureau of Statistics. A result above 50.0 shows a rise in activity.

China also saw growth in its services sector, with the Caixin services PMI rising to 55.0 in February from 52.9 in January, far exceeding a predicted 50.5. This is the fastest pace of growth since April 2021. New export growth also accelerated to the highest level in four years.

Despite the positive data, Beijing set a growth target of only 5.0% for the year, the lowest in decades. The country recorded 3.0% growth in 2022, falling short of its target of 5.5%.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][zuperla_single_image image=”23486″ inherit_align=”left”][/vc_column][/vc_row]


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