Omnis Weekly Market Update – 31 July 2023

Major stock markets advanced in the week, despite the US and European Central Banks increase their interest rates. Inflation in Japan remains above target. Meanwhile, China’s government pledging further support to boost the economy. Eyes are on the UK as the Bank of England is meeting this week to discuss the next move for interest rates, with the market expecting another hike.

 Last week’s performance – major stock markets


S&P 500 +1.01%
Nikkei 225 +1.41%
CSI 300 +4.47%
Euro Stoxx 50 +1.71%
FTSE 100 +0.40%


US: Have we seen the last of the interest rate hikes?

Stock markets ended higher this week, with sentiment receiving a boost from generally positive economic readings, particularly on inflation. The Federal Reserve increased interest rates by 0.25 percentage points to bring them to the range of 5.25%-5.50%, with expectations growing that the central bank is done with raising interest rates. The Federal Reserve has stressed that incoming data would guide any further changes to rates. Data released showed that the economy has expanded year over year, surpassing expectations and growth from the previous quarter. Further data indicated that the economy could manage to avoid a recession.

Japan: Bank of Japan keeps interest rates consistent

The Bank of Japan tweaked its monetary policy this week by announcing that it would increase its flexibility around controlling their long-term interest rates. They also decided to leave interest rates unchanged at -0.1%. Projected economic growth for the year remains at healthy levels, but on the contrary, the Bank of Japan expects higher levels of inflation than what was previously anticipated. Overall, stocks rose in the week with the Yen strengthening against the dollar.

China: Lowered growth forecasts

Markets rallied after the Government continued to signal that it will provide more stimulus to support the economy. Officials vowed to increase support to the real estate sector, which has been of poor health. Economists have lowered their growth forecasts for the nation after reports that the economy grew at slower than expected pace during the second quarter of the year due to weakening domestic and external demand. Despite an overall improvement in manufacturing activity, profits have been under pressure as recent data indicated that China is on the verge of slipping into deflation.

Europe: The European Central Bank hikes again

Markets advanced across the region despite the European Central Bank increasing interest rates by 0.25 percentage points, bringing them to 3.75%. News from China that authorities have pledged to aid economic growth via further support, along with the European Central bank signalling that rate hikes may be nearing an end appeared to boost investor sentiment. Annual inflation appears to have slowed down compared to last month’s figures. Data also showed that business activity has slightly slowed down.

UK: Another interest rate hike is expected

Markets appeared to rally this week, with retail sales up compared to the previous month. According to data released, two fifths of renters or mortgage holders are struggling with payments, with just under half experiencing a rise in costs in the last 6 months. The Bank of England is meeting this week to discuss the next move for interest rates, with markets expecting a quarter percentage point rise to bring the new level of interest rates to 5.25%. Although inflation subdued to 7.9% last week, this still remains the highest in the G7 group the UK’s job market is mixed, as wage growth appears to be rising but unemployment data shows an unexpected increase.