Market Overview|Quilter Cheviot|Weekly Comment

Central Bank expectations weigh on sentiment

Market Overview from Quilter Cheviot

by Alan McIntosh, Chief Investment Strategist

Growing concerns surrounding increasingly aggressive central bank tightening weighed on market sentiment last week, with global stock markets drifting lower and yields continuing to push higher. Comments from Fed Chair Jerome Powell extolling the virtues of “front-loading” rate rises have been attributed by some to causing the moves, but in effect it was more likely a continuation of the prevailing theme of recent months.

A 50bp hike from the Federal Reserve is now largely priced-in for its meeting early next month and the Bank of England is expected to deliver a 25bp hike the day after, a move which would be a third 25bp hike in just over three months. This combination of tighter monetary policy and slowing growth expectations has been reflected in a further flattening of yield curves. China’s zero-Covid policy is exacerbating both these factors, accentuating pandemic-related supply chain issues and adding to inflationary pressures while simultaneously weighing on global growth. Dozens of cities in China are now in full or partial lockdown, most notably Shanghai, and a mass testing order in Beijing has raised fears the capital is destined to join them…

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