Skip to main content Skip to site footer

You are using an outdated browser. Please upgrade your browser to improve your experience.

Archinomics Monthly - January 2023

one year ago



Global stocks rallied strongly, boosted by optimism over China’s reopening and further falls in the headline rate of inflation. In the US, the S&P 500 Index climbed 6.2% while the tech-heavy Nasdaq Index surged 10.7%, its strongest monthly gain in six months. European equities also soared (EuroStoxx 50 +9.7%) as did Chinese shares (MSCI China +12.3%). Japanese and UK stocks lagged, but still rose 4.4% (TOPIX) and 4.3%
(FTSE 100). The large cap UK index’s heavy weighting to energy companies and defensive sectors, such as consumer staples and healthcare, was a relative drag in an environment of improving risk appetite.


Global bonds rose as a further decline in inflationary pressures boosted hopes that central banks might reduce the pace at which they raise interest rates. The 10 year US Treasury bond gained 3.1%, while the 10 year German Bund returned 2.5%, as yields fell around 30 basis points in both markets. Corporate bonds outperformed sovereign debt as credit spreads tightened, reflecting investors’ greater appetite for risk.


The US dollar weakened as speculation grew that the Federal Reserve (Fed) was nearing the end of its rate-hiking cycle. In contrast, the British pound strengthened the most: UK inflation is proving to be stickier than elsewhere, meaning the Bank of England is likely to continue to tighten rates aggressively. The euro strengthened against the Japanese yen, reflecting the divergent monetary stances of the European Central Bank and the Bank of Japan.


Oil prices slid slightly, with Brent crude easing 1.7% to $84.5 a barrel. Natural gas prices fell sharply to levels last seen prior to Russia’s invasion of Ukraine, helped by relatively mild winter weather in Europe and news that European gas storage remains well above average levels for this time of the year. Conversely, prices for industrial metals, such as copper and iron ore, rallied as traders looked to a pick up in China’s growth rate in 2023.

Market Volatility

Market volatility

Volatility fell, with the Vix Index declining 10.5% to close January at 19.4. A reading below 20 is widely viewed as an indicator of market stability. 

Responsible investing

The EU sought to head off a competitive threat to European companies caused by the tax subsidies for green investment offered in US President Joe Biden’s Inflation Reduction Act. The EU’s proposals will relax state aid rules to support investment in green sectors, via the creation of tax benefits and other measures.


The headline rate of inflation continued to fall across most economies. US consumer prices rose at an annual rate of 6.5% for December, the lowest rate since October 2021, while headline eurozone inflation eased to 9.2% compared to a peak of 10.6% in October 2022. Nevertheless, central banks remained hawkish, warning that the inflationary battle was far from over.

China missed its 5.5% growth target for 2022 by a sizeable margin, with the economy expanding 2.9% over the year. However, economic activity picked up sharply in January, with the National Bureau of Statistics composite purchasing managers’ index surging to a seven-month high, despite the continued high level of infections caused by the lifting of all Covid-19 restrictions.

Recessionary fears faded, particularly in Europe which stands to benefit from a continued drop in natural gas prices. The International Monetary Fund (IMF) raised its growth outlook for 2023 and beyond, citing China’s zero-Covid pivot, US support for green investment and lower recessionary risk in Europe as reasons for the improved forecast. 


on the

The US Federal Reserve (Fed) is expected to maintain the slower pace of rate hikes, with forecasts of a further 25 basis point increase at the next meeting. In Europe, the European Central Bank (ECB) and Bank of England (BoE) are expected to keep the level of rate hikes at 50 basis points.

While the headline rate of inflation in the eurozone has fallen in recent months, core inflation is holding steady at 5.2%, some way above the ECB’s target of 2%. Meanwhile, UK inflation is unlikely to show any meaningful fall, with public sector workers demanding significant wage hikes, supporting the BoE’s more aggressive rate hiking stance.

As the war in Ukraine approaches its one year anniversary, there appears to be little sign of any de-escalation in hostilities. Pledges of further support, including tanks, from Europe and the US have further enraged Moscow, meaning a significant Russian offensive operation is expected in the coming weeks.


We use cookies to give you the best possible experience of our website. If you continue, we'll assume you are happy for your web browser to receive all cookies from our website. See our cookie policy for more information on cookies and how we manage them.