Quilter Cheviot|Weekly Comment

Market takes stock as BoE delivers another increase

Our weekly market overview from Quilter Cheviot

By Alan McIntosh, Chief Investment Strategist

Major stock markets were mixed last week as investors took stock of recent events, the flow of first quarter earnings began to slow and the Bank of England (BoE) raised interest rates. There is an increasing focus on the US “debt ceiling” among market participants lately and while it is yet to have much of an impact on most asset classes, it is worth keeping an eye on heading into the 1 June deadline. The MSCI All Country World Index lost 0.4% on the week but remains 8.3% higher year to date (YTD), while government bond yields in the UK and US edged higher.

Following on from an eventful previous week on the economic calendar, macro events took more of a back seat last week (aside from the Bank of England decision – see below). The release of the latest inflation data in the US showed further progress, with the headline consumer price index (CPI) reading falling to its lowest level in two years at 4.9%. There remains the unusual dynamic of core inflation (excluding food and energy) outstripping the headline figure, coming in line with expectations at 5.5%.

Overall, the data was mildly encouraging but unlikely to have much discernible impact on monetary policy for now. It is worth noting the market reaction to this release has been more subdued as of late, with volatility noticeably lower than some of the outsized swings which accompanied it in months gone by. This is likely because there’s a growing consensus that inflation has peaked and is expected to continue to decline…

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