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Global Markets Weekly Update

Our analysts recap activities across global markets in our weekly report.

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.


Stocks build on their year-to-date rally

Most of the major indexes extended their winning streaks into February, helped by some upside surprises in economic data and fourth-quarter earnings reports, as well as what some saw as encouraging signals from the Federal Reserve. The S&P 500 Index reached an intraday high of 4,195 on Thursday, its best level since late August.

A 23% jump on Thursday in Facebook’s parent company, Meta Platforms—the stock’s biggest daily gain in almost a decade—provided a major boost to the technology-heavy Nasdaq Composite Index and other mega-cap technology and internet-related growth stocks. The social media giant beat revenue expectations for the fourth quarter, and CEO Mark Zuckerberg delivered an upbeat outlook for the year ahead. Some of the enthusiasm drained on Friday, however, following disappointing results and outlooks from Apple, Google’s parent company Alphabet, and

T. Rowe Price traders noted that technical factors may have accelerated the week’s gains. On Thursday, the S&P 500 marked its first “golden cross” in two-and-a-half years, as the index’s 50-day moving average drifted slightly above its 200-day average. The metric is used by technical analysts as an indicator that an upward trend in the markets is gaining momentum. Heavy “short covering,” or the buying of stocks by hedge funds and others to cover their bets that the stock’s price will fall, also appeared to be at work.

Employment costs ease, while Fed Chair Powell acknowledges disinflation

The busiest week of quarterly earnings reports—companies representing roughly a third of the S&P 500’s market capitalization released results—coincided with a string of closely watched economic reports, resulting in multiple crosswinds for investors to consider. T. Rowe Price traders noted that better-than-expected earnings from General Motors, United Parcel Service, and other companies helped futures gain momentum on Tuesday morning, but the real shift in sentiment followed the release of the Labor Department’s Employment Cost Index (ECI) as trading opened. The ECI rose 1.0% in the final quarter of 2022, a bit less than expected and its lowest level in a year, providing further evidence that a key concern of Fed policymakers was moving in the right direction.

On Wednesday, the Fed raised official short-term interest rates by another quarter point, as was widely expected, and Fed Chair Jerome Powell acknowledged at his post-meeting press conference that the ECI was “abating a little bit.” Powell also noted, however, that the ECI and average hourly earnings gains remained “fairly elevated” and that “the disinflationary process” was “at an early stage” and focused on goods prices because of healing supply chains. Nevertheless, the major indexes jumped as investors seemed to interpret the overall tone of his remarks as more dovish than expected.

Friday brings major data surprises

Friday’s economic data brought major surprises that caused investors to reconsider their rate expectations and sent bond yields sharply higher. The Labor Department reported that employers added 517,000 nonfarm jobs in January, roughly triple consensus estimates and the biggest gain in six months. The unemployment rate slipped to 3.4%, its lowest level since 1969. (Weekly jobless claims, reported Thursday, fell to their lowest level in nine months.) Investors seemed to take the news mostly in stride, as the tight labor market did not seem to be flowing proportionately into wage gains. The monthly rise in average hourly earnings fell back to 0.3%, helping bring the year-over-year increase back down to 4.4%, the lowest level since August 2021.

Friday’s other surprise was January’s jump in services sector activity. The Institute for Supply Management reported that its index of nonmanufacturing activity jumped to 55.2 from 49.2 in December, reversing nearly all its steep drop in December and moving it well back into expansion territory (the 50 level separates contraction from expansion).

Powell’s seemingly dovish comments, reassuring inflation signals, and upside economic surprises sent the yield on the benchmark 10-year U.S. Treasury note on a round trip over the week, falling as low as 3.33% in intraday trading on Thursday before turning higher to end Friday at 3.53%, just above where it had ended the previous week. (Bond prices and yields move in opposite directions.) Our traders noted that healthy inflows and a lack of new supply helped tax-exempt municipal bonds over much of the week.

Index Friday's Close Week’s Change % Change YTD
DJIA 31,500.68 1611.90 -13.31%
S&P 500 3,911.74 236.90 -17.93%
Nasdaq Composite 11,607.62 809.27 -25.81%
S&P MidCap 400 2,334.40 113.96 -17.86%
Russell 2000 1,765.72 100.04 -21.36%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.

Investors embrace risk

According to our traders, investment-grade corporate credit spreads moved tighter (indicating strong performance relative to Treasuries) over the week, with more volatile corporate issues outperforming. Technical conditions were generally supportive as trading volumes in the secondary market were above daily averages and primary issuance took a pause in the days leading up to the Fed’s monetary policy meeting.

High yield bonds tracked equities higher, and the broad risk-on sentiment throughout most of the week led to expectations for the volume of new high yield deals to pick up. The bank loan market was generally firm alongside the broader risk rally following the Fed’s interest rate decision, which was in line with expectations.


Shares in Europe rose on hopes that central banks may be nearing the end of the most restrictive phase of this monetary tightening cycle. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.23% higher. Major stock indexes also advanced. Germany’s DAX Index added 2.15%, France’s CAC 40 Index gained 1.93%, and Italy’s FTSE MIB Index climbed 1.95%. The UK’s FTSE 100 Index climbed 1.76%, partly bolstered by the depreciation of the pound against the U.S. dollar after the Bank of England (BoE) suggested interest rates might peak at a lower level than expected by the market.

European government bond yields declined broadly as investors embraced the potential that major central banks could pivot their monetary policy later this year. Germany’s 10-year sovereign bond yield fell toward 2% despite the European Central Bank (ECB) raising interest rates by half a percentage point and signaling a similar move in March. French and Swiss government bond yields also declined. In the UK, where the BoE also hiked rates, yields on benchmark 10-year debt followed global counterparts and approached 3%.

ECB says it will hike rates again in March

The ECB raised its key interest rates by half a percentage point, taking the deposit rate to 2.5%. The central bank expects to raise rates by the same amount in March due to underlying inflation pressures. The ECB added that it “will then evaluate the subsequent path of its monetary policy,” with “future decisions continuing to be data-dependent and following a meeting-by-meeting approach.”

Inflation slows more than forecast; economy unexpectedly grows

The latest data showed the headline rate of inflation in the eurozone cooled more than expected in January to an annual rate of 8.5%, from 9.2% the previous month. But core inflation—excluding changes in food and energy prices—remained at an all-time high of 5.2%. The eurozone economy unexpectedly grew 0.1% in the last three months of 2022.

BoE hints rates may have peaked after latest hike

The BoE’s nine policymakers voted 7-2 to raise the key interest rate by half a percentage point to 4%, in line with expectations. The bank said headline inflation has begun to edge back and projected that this metric would fall sharply over the course of the year, reaching 3% in the first quarter of 2024. But the BoE warned that “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.” It also said that “the risks to inflation are skewed significantly to the upside.”

The BoE also said a UK recession was likely to be “much shallower” than forecast in November, largely due to a drop in energy prices. Meanwhile, the International Monetary Fund (IMF) projected that the UK economy would contract 0.5% this year.


Japan’s stock markets registered mixed performance for the week, with the Nikkei 225 Index rising 0.46% and the broader TOPIX Index down 0.63%. Sentiment was boosted by expectations that the U.S. Federal Reserve’s monetary policy tightening cycle may be nearing its peak. The Bank of Japan (BoJ) reiterated its commitment to ultra-loose monetary policy.

The yield on the 10-year Japanese government bond (JGB) rose to 0.49%, from 0.47% at the end of the previous week. Figures released by the BoJ showed that the central bank’s JGB purchases reached a record high in January, as it sought to defend its wider 0.50% yield cap. The Fed’s moderation of its rate hikes and some anticipation of potential change in the BoJ’s easing stance supported the yen, which strengthened to around JPY 128.58 against the U.S. dollar, from the prior week’s JPY 129.89.

BoJ to scrutinize outcome of annual wage negotiations

BoJ Deputy Governor Masazumi Wakatabe said during the week that the outcome of annual “shunto” wage negotiations (expected mid-March) between companies and unions and any changes to the inflation outlook would come under close scrutiny. He noted that an increasing number of companies were becoming keener to lift wages. BoJ Governor Haruhiko Kuroda also expects quite significant wage rises, as the economy improves and labor market conditions tighten.

Rengo, an umbrella organization for labor unions, has set a 5% wage hike as the target for the regular workers of the primarily large companies it represents. The pace of wage revisions announced by Japanese corporations has already accelerated markedly since late last year.

Economic developments largely positive

On the economic data front, Japan’s industrial production fell 0.1% month on month in December, a smaller-than-expected decline, while annualized retail sales growth of 3.8% beat expectations on a continued post-pandemic recovery in consumption. Consumer confidence improved in January, while the unemployment rate was unchanged. Although the final services Purchasing Managers’ Index was revised slightly lower, the survey showed that services sector activity expanded at a fast pace in January, boosted by the government’s travel subsidy program.


Chinese equities fell in the first full week of trading after the weeklong Lunar New Year holiday as investors pocketed gains from a recent rally and turned cautious about the strength of the country’s recovery. The broader capitalization-weighted Shanghai Composite Index eased 0.04% and the blue chip CSI 300 Index slipped 0.95%. In Hong Kong, the benchmark Hang Seng Index retreated 4.5%, its biggest weekly decline since the end of October, according to Reuters.

In economic news, China’s official manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in January from December’s 47.0. This marked a return to growth for the first time since September as domestic activity improved after Beijing abandoned its coronavirus restrictions at year-end. The nonmanufacturing PMI rose to a better-than-expected 54.4 from 41.6, reaching its highest reading since June. Separately, the private Caixin/S&P Global survey of manufacturing activity in January remained below 50, the level separating growth from contraction, as output prices and new orders declined and exports retreated amid softening global demand. However, the Caixin/S&P Global survey of services activity rose to a better-than-expected 52.9 reading compared with 48.0 in December.

Meanwhile, the IMF raised its annual growth forecast for China as the economy rebounds following the removal of pandemic curbs. The IMF projected that China’s economy would grow 5.2% this year, up from its October forecast of 4.4%, and kept its estimate for 2024 at 4.5%.

Property sector still mired in slowdown

New home sales in China fell by 48.6% in January as weak demand weighed on buying activity, reported state-run media. The drop in sales comes even as many cities across the country have reportedly reduced mortgage rates for first-time homebuyers in advance of an expected rate cut by the central bank. In January, the People’s Bank of China announced that first-time buyers would be offered lower mortgage rates if new home prices fell for three consecutive months.

Other Key Markets


In recent weeks, two of the major credit agencies revised their assessments of Hungary’s financial situation. On January 20, Fitch changed its outlook on Hungary’s BBB rating from “stable” to “negative,” citing a tough external environment and uncertainty regarding the flow of funds from the European Union (EU) as the main catalysts for the change. T. Rowe Price credit analyst Ivan Morozov acknowledges and agrees that higher energy costs following Russia’s invasion of Ukraine—given that Hungary relies greatly on Russian energy exports—have pushed Hungary’s current account into a significant deficit situation and that uncertainty regarding the flow of EU funds translates into uncertainty about how Hungary would fund that deficit.

Just one week later, S&P Global downgraded its rating on Hungary from BBB to BBB-, citing the same reasons. The timing, however, was sooner than Morozov expected: S&P had reduced its outlook to negative back in August, so Hungary has not had much time to address S&P’s credit concerns. Despite these actions, Morozov notes that Hungary is still considered investment grade and believes that possible downgrades to below investment grade are not imminent.


Stocks in Brazil, as measured by the Bovespa Index, returned -3.2%. On Wednesday, Brazil’s central bank decided to leave the benchmark Selic rate at 13.75%, which was widely expected. However, according to T. Rowe Price sovereign analyst Richard Hall, policymakers published a hawkish post-meeting statement.

Central bank officials had previously established and operated under a “reference scenario” (i.e., a base case) for interest rates and inflation that projected some interest rate cuts in 2023 and a drop in the 12-month inflation rate to 3.6% by the third quarter of 2024. However, due to uncertainty about how long inflation may remain elevated, as well as fiscal uncertainty stemming from President Luiz Inácio Lula da Silva’s new administration, the central bank has created an alternative scenario for their inflation model. Under this new model, the Selic rate remains at 13.75%, and inflation falls to 3.1%—which is much closer to the central bank’s 3% inflation target—by the third quarter of 2024.

Other signs of hawkishness in the post-meeting statement are policymakers’ commitment to remain “vigilant, assessing if the strategy of maintaining the Selic rate for a longer period than in the reference scenario will be enough to ensure the convergence of inflation.” They also insist that they will “persist until the disinflationary process consolidates and inflation expectations anchor around its targets, which have shown deterioration at longer horizons since the previous meeting.” Hall, therefore, concludes that the central bank is biased to keep the Selic rate at an elevated level for longer than previously expected.


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The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation, or a solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

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