Market Pulse - February 2023

• Market Pulse
• 07.03.23
• ILIM

Key themes

• In February, falling US fourth quarter earnings and weak guidance helped push equities lower amid more persistent inflation than expected and strong economic data.
• The market has interpreted this data as likely to usher in higher terminal rates in the US. The potential for further monetary tightening therefore weighed on bond prices as well as equities.
• In Europe, despite falling headline inflation, the European Central Bank (ECB) remained hawkish amid sticky core inflation.

Markets snapshot

• The MSCI AC World equity index fell by 1.9% (0.5% in euros) over January.
• The US ended the month down -2.4% (flat in euro terms), as Q4 company earnings were weak.
• Europe ex UK equities outperformed, rising 1.3%, amid support from China’s reopening and a weaker euro, both aiding exporters, and natural gas prices falling.
• US 10-year Treasury yields ended February at 3.92% (compared to 3.51% a month earlier), while the equivalent for German bunds was at 2.65% (against 2.29% at the end of January). The rebound in yields pushed the ICE BofA 5Y+ Euro Government index lower by -3.3% in February.
• The euro against the dollar ended February at 1.0606, down from 1.0865 at the end of January, with the Dollar index (DXY) rising by 2.7% over the period.
• Commodities were down by -3.8% (-1.5% in euro terms), with Brent crude oil down by -0.7% and copper down by -3.0%.