Indices

The major indices were under pressure last week as a result of inflation data that exceeded expectations and a persistent decline in confidence that the Federal Reserve’s rate hikes will come to an end soon. The Dow experienced its fourth consecutive losing week while the S&P 500 and Nasdaq experienced their worst weeks of the year, losing 2.7% and 3.4%, respectively. Since September 2022, the Dow experienced its lowest weekly performance.

Better-than-expected economic statistics and corporate performance increased the possibility that central banks may continue raising interest rates, which led to a decline in European stock prices. The pan-European STOXX Europe 600 Index finished lower by 1.42% in local currency terms. Important stock indices also fell. The DAX Index in Germany dropped 1.76%, and the FTSE 100 Index in the UK dropped 1.57%.

Forex

This week, hotter-than-expected statistics helped the dollar gain ground versus many of its key rivals. The dollar index rose 0.6% to 105.20, a seven-week high, and is now on course to record its biggest weekly gain since late September. As investors are expecting the interest rates to be increased again in the US, the dollar will continue to strengthen against the EUR, Japanese Yen, and the British Pound.

Macro

Releases of PMI in the Eurozone, as well as in Germany, have shown market expansion in the services sector which was held up mainly by financial and technological services. The expansion in the services sector was even higher than what was expected, however, on the other hand, the manufacturing sector showed market contraction for even more than consensus and the previous data. In Germany, S&P Global Manufacturing PMI Flash was 46.5 whereas S&P Global Services PMI Flash was 51.3. In the Eurozone, Manufacturing PMI Flash was 48.5, and Services PMI Flash was 53. Similar data were released in the UK with Manufacturing PMI being 49.2 and Services PMI being 53.3.

In the USA, PMI Flash resulted better than the previous release and what was expected, however, as per the theory below 50 points still signalises market contraction and it seems that the contraction is slowly turning better in the USA.

Amid mixed data of the PMI, investors, and analysts remained positive as the German ZEW, including Eurozone ZEW, was reported to be 28.1 in Germany and 29.7 in the Eurozone which was by over 10 points higher than the previous and over 5 points higher than what was expected.

According to S&P Global/CIPS PMI data, business activity in the UK manufacturing and services sectors unexpectedly increased in February. According to the survey, prices charged by businesses only slightly decreased throughout the month, and many of them cited the necessity to pass on rising labor expenses, food prices, and energy costs.