Rates continue to rise with the US ten-year breaching the 2% level for the first time since summer 2019. Inflation shows no sign of abating, US CPI has just come in at 7.5%, though we do still expect this to ease as the year progresses. With accompanying expectations for further rate increases from central banks, even the ECB now appears to be wavering, observers are now ramping-up their forecasts for the number of moves to be expected.

Energy prices have continued to climb, Brent oil is up a further 9% this period, as OPEC+ talks about increases in production but doesn’t actually deliver. Shuttle diplomacy around Ukraine continues with no clear progress, at least they are still talking. Against this rather dreary backdrop the quarterly reporting season in America has actually gone rather well and economic growth is resilient (UK GDP for Q4 just out and ‘surprisingly’ good).

The headline equity indices have continued lower, led by a 6.5% fall for the NASDAQ, the only exception being the FTSE 100 Index, which has been held up by index heavyweights Shell, HSBC and AstraZeneca. The principal gainer really has been volatility, which has been plain to see in a number of major companies. Meta Platforms (Facebook) was the big casualty, collapsing by 32% after reporting a loss of users thanks to competition from Tiktok. Netflix suffered a similar fate after reporting disappointing subscriber growth and was the other major casualty among the ‘FAANGS’, down by a quarter over this period. Elsewhere in this group it was a different story, Apple fell back with the market but then reported record revenues and rallied back up to close little changed over the period, Alphabet followed a similar trajectory, a fall, startlingly good figures, and a sharp rally.

Intel reported quite disappointing figures and their stock sank 13%, Samsung has also been slipping, down by around 5%. Microsoft is off 4% over the period, they reported good figures, but all eyes on their $70 billion bid for Activision Blizzard, the games company best known for ‘Call of Duty’. Activision jumped 25% on the news but, unsurprisingly, Sony Group fell 11%. We await news on any regulatory concerns over the bid. Other features in the consumer discretionary area were weakness in a number of the motor companies, Tesla down by 15% and Ford by 25% (such a volatile stock now), though the Japanese motor companies were slightly better on balance. Pharmaceuticals were quieter with generally smaller moves though Moderna suffered again, falling a further 30%, last August their stock reached almost to $500, it is now trading around $160. Pfizer weakened in sympathy with a 10% fall, but overall they have done much better.

Most of the gainers this time can be found in the more cyclical areas, led by the oil stocks, which are also reporting bumper profits from rising energy prices, Shell gained 14%, BP and Exon Mobil both around 10%.

Mining companies continued with their strong start to the year on the back of strong base metals prices, Anglo American and Rio Tinto both up around 10%. Financials benefitted from the move in rates, led by the international banks HSBC and Standard Chartered which both gained around 14%, Société Générale and Banco Santander rose 10%. US banks were the exception again being generally weaker.

It does appear that this volatility is going to remain as a feature of this first quarter as rising rates, geo-political tensions and inflation play off against good growth and employments.

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