This week

With all the momentum of a downhill skier, January proved something of a tumultuous time for global markets. However, as the first full week of February ushered in the Winter Olympics, it seems investors went a little off-piste themselves, as the losses suffered previously began to be recouped.

Of course, those focussing on the bond markets will be all too familiar with the French term “piste” – deriving from the Italian verb pistare meaning to trample down, (interestingly where the English word piston comes from) as the yield curve continues to flatten. With spiralling energy costs driving inflation to record levels, forcing many central bank’s hands into a more hawkish standpoint, it was little wonder this week that FTSE oil heavyweight BP, released their best results in 8 years. Profiting from oil prices that have soared past $90 a barrel recently, the company was also able boost share repurchases and accelerate its plans to cut emissions with increased spending on low carbon energy. BP declared quarterly profits reached $4.1 billion, beating analysts' forecast of $3.93 billion comfortably. The results represent BP’s best quarterly profits since early 2013, evidently suffering from a prolonged period of depressed oil prices.

It wasn't just oil and skiers that were the big jumpers of the week, as European car makers also has a good run. Wednesday saw the index accelerate 4% as Volkswagen rose 6.1%, while its biggest investor, Porsche jumped 8.2%. Sentiment on the continent was also boosted by French President Emmanuel Macron, who met Russian President Vladimir Putin on Monday. In a statement afterwards, Macron said he believed steps can be taken to de-escalate the crisis which has seen Russia amass troops on its border with Ukraine.

Slaloming between Europe and the US, Thursday brought us much anticipated inflation figures from the world’s largest economy. Coming in stronger than expected for January, prices rose 0.6% on a monthly basis and 7.5% year-on-year, versus consensus expectations of 7.3%. Now at its highest since February 1982, the reading was led by soaring costs for rent, electricity and food. Rampant inflation has overshadowed strong economic numbers for the US, growing at its fastest pace for 37 years and could heap more political pressure on US President Joe Biden, whose popularity has been declining rapidly amid anxiety over the rising cost of living.

The inflation data was released in tandem with US jobless claims, also highlighting the strength of the US economy. Applications for state unemployment insurance fell for a third week in a row as Covid-19 cases continue to drop, with claims decreasing by 16,000 to 223,000 during the past week.

Next week

It is interesting that on the Wikipedia entry for Valentine’s Day for the Philippines, it merely says the day is usually marked by a steep increase in the price of flowers, particularly red roses. With the usual last-minute dash to a card shop and florists on Monday, many will be looking towards the Office for National Statistic’s Average Earnings Index, released the following day, for some signs of solace.

Detailing the change in the price businesses and the government pay their employees, including bonuses, the data is crucial for understanding the future trajectory of inflation, as the more consumers earn, the more they tend to spend. With the Bank of England having already raised rates twice in 3 months and energy prices spiralling, it will be interesting to see if wages are keeping pace. It is also worth mentioning that 6 of the previous 7 readings have all seen earnings come in above consensus forecasts.

With house prices also on the rise, the government’s monthly House Price Index data should make for interesting reading. These numbers, which incorporate a range of building society and bank’s data, give a more comprehensive view of the domestic housing market.

The week will be rounded off on the continent as a rapidly reopening Eurozone measures the confidence of its consumers against an increasingly mixed backdrop. With inflation also proving to be a challenge for households in Europe, we will be given an insight into how the has affected the psyche of the consumer, especially as pandemic lockdowns are eased and business conditions improve.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in February 2022.