Market Commentary January 2023
Overall, contrary to expectations, global liquidity (M2) has increased over the last few months. Since the end of November last year, the USD has depreciated. In other words, USD were sold, which increased the liquidity of the US currency. Instead of financing itself through issues of U.S. government bonds, the U.S. Treasury drew over 400 billion from your account at the Federal Reserve. This increased the liquidity of the USD accordingly.
The Bank of Japan invested in government bonds to secure the yield on 10-year Japanese government bonds, pumping several $100 billion in liquidity into the market.
Finally, the departure from the zero-covid policy prompted the Peoples Bank of China to start increasing liquidity.
These positive liquidity effects, combined with a slight decline in inflation in both the USD and the EUR and the hope of an easing of the interest rate policy by the central banks soon, helped the financial markets to get off to a flying start in 2023.
The end of the zero-covid policy and the prospect of a recovery of the Chinese economy helped the shares of the German Aurubis AG to an advance of 24% over the last month. Solid order intake drove up the shares of Italy's Leonardo S.p.A. by 16%. Expectations of lower inflation/interest rates drove the shares of German Aroundtown SA up 15%.
After a gain of over 250% since the end of January last year, the shares of Danish D/S Norden A/S took a breather and corrected by 13%. Defensive stocks, such as those of Serco Group Plc and British American Tobacco Plc, had a hard time and were not the first choice after such an overwhelming stock market start. They closed the month at -6.7% and -5.9% respectively.
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Your CIIM Team