Hopes for China’s Economic Recovery Boosts Equity Markets

  • Market Overview

Global equity markets started the week in the green on continued optimism over an economic recovery in China and hopes that central banks could increase interest rates less aggressively than last year. The local bourse closed up by 1.08% boosted by financials, industrials and resource-linked counters. According to Trading Economics: “President Cyril Ramaphosa appealed to the board of power utility Eskom to halt or delay its planned 18.65% electricity price hike, its biggest electricity price increase in more than a decade, saying that to hike prices while load shedding was at its worst would be unfair to citizens. His comments (came) after Eskom said the country could face two years of persistent blackouts as it overhauls its ageing power stations.” Most local investors will now wait to see if the South African Reserve Bank increases the repo rate this Thursday by 50 basis points as expected.

Good performances from chipmakers boosted Wall Street on Monday and “helped ease pressure on the battered technology sector at the start of another big week for corporate earnings. Investors are eyeing results from Microsoft (NASDAQ: MSFT ), Tesla (NASDAQ: TSLA ), IBM (NYSE: IBM ) and Intel (NASDAQ: INTC ) this week to see how their businesses are coping with the threat of an economic slowdown triggered by the Federal Reserve's aggressive policy tightening,” reported Reuters.

Major European markets also closed in the green as “optimism surrounding China's reopening, a drop in European gas prices and expectations of less aggressive monetary tightening from the Federal Reserve” boosted risk appetite. “ECB official said the bloc's central bank is set to raise interest rates by 50 bps in both February and March and will continue to raise rates in the months after,” stated Trading Economics.

While most Asian markets were closed for the Lunar New Year holiday, the Japanese Nikkei closed up by 1.33% which “built on wins from last week as the Bank of Japan defied market pressure to tweak its ultra-low interest rate policy.”

The price of spot gold traded at $1 922.26 at 19h00, while Brent crude traded higher at $88.47 a barrel “as investors continued to assess the global demand outlook while bracing for further sanctions on Russian oil .”

PSG Wealth Daily Investment Update, 24 January 2023

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