Daily Market Outlook, February 28, 2023

Mixed Market Performance Into Month End

Asian equities unable to muster any meaningful upside momentum, as month end flows failed ignite risk sentiment, the handover from Wall Street was marginally positive, after recovering the majority of Friday’s losses investors pared risk exposure into the close leaving the benchmark indices closing well off best levels on the day, the Nasdaq was the outperformer driven by a 5% gain in Tesla, on news that the German production plant has achieved weekly production of 4000 units ahead of schedule.

Data docket has nothing of note for the European session, investors will once again focus on a bevy of central bank speakers. UK investors are now concerned that UK rates may increase by another 75 basis points despite earlier Bank of England signals that they may be close to a terminal rate, markets will be seeking guidance on this narrative, however, most of today’s comments from BoE officials are likely to be focused on other topics, as such, investors will be more focused on tomorrow’s comments by BoE Governor Bailey, which may provide further clues as to the UK rate path. In the US, markets will parse comments from Fed speakers for indications whether they should be concerned about a larger 50bp rate rise at the FOMC’s March meeting, it opted for a 25bp increase at its February meeting and until last week a similar sized move was also being priced in for March, but now that seems to be less of a certain given the recent data stateside, especially with Friday’s hotter than expected PCE print, the preferred Fed inflation gauge.

The US consumer confidence reading for February will be eyed for any signs of a retreat after the rebound seen in recent months. The pickup in gasoline prices argues for a pullback, this is countered by the employment environment as consumers remain reassured by the continued strength in wages. Overnight, investors will be keen to digest China PMI data with many market watchers looking for further green signs of growth, driven by strengthening demand as the impact of the removal of Covid restrictions should be starting to feed through to the data.