Indices

The S&P 500 Index experienced a significant decline over the week, as investors processed additional comments from Federal Reserve Chair Jerome Powell and the indications that he and other policymakers needed to take further action to address inflation and the strong labor market. On Friday, the index dropped to its lowest point since January 5.

European shares tumbled in line with worldwide markets due to concerns about the banking system’s stability and the potential impact of sustained high interest rates. The pan-European STOXX Europe 600 Index dropped 2.26% in the local currency terms, while major stock indexes, such as Germany’s DAX Index, declined 0.97%, and the UK’s FTSE 100 Index fell 2.50%.

Forex

On Friday, the dollar lost strength as the February’s labor data in the United States indicated aslower wage growth, implying that the Federal Reserve’s pace of interest rate hikes may be moderate and therefore reducing the attractiveness of the greenback. Although the U.S. economy added jobs quickly in February, the decrease in the wage growth and the increase in the unemployment rate caused financial markets to lower their expectations for a 50-basis point rate hike during the Fed’s upcoming meeting in two weeks.

Investors pushed the Canadian dollar down against the dollar, breaching the $1.38 mark for the first time since November, in response to signals that the Bank of Canada’s tightening cycle may have come to an end. In its March meeting, policymakers left the target for the overnight rate unchanged at 4.5%, as anticipated, and stated that they would maintain it at the present level if the economic conditions developed broadly in line with the expectations.

Macro

Last month, payrolls increased by 311,000, surpassing the expectations from the analysts. This extended the longest streak in data, as the job growth exceeded the expectations for the eleventh consecutive month. The labor-force participation rate, which indicates the proportion of the population working or seeking employment, also increased to 62.5%, the highest since March 2020 and surprisingly, the unemployment rate increased from 3.4%, the lowest in five decades in January, to 3.6%.

GDP growth rate and the numbers on employment change released in the Eurozone have confirmed that the economy is weakening due to the effects of higher interest rates and the ongoing impacts of the war on Ukraine.

Despite the sharp increase in interest rates and a collapse in consumer confidence towards the end of 2022, preliminary estimates reveal that the U.K. economy defied gravity and increased by 0.3% in January, resulting in the rolling quarterly growth rate avoiding negative territory once again.

On Friday, the Bank of Japan (BOJ) chose to maintain its ultra-low interest rates and refrained from altering its contentious bond yield control policy, keeping its possibilities open before a leadership transition scheduled for April.