Global market opened higher at the beginning of 2023 driven by both China re-opening and easing concern of further monetary policies tightness in US. On equity side, SPX rose by 4.8%. DAX increased by 8.7%. HSI and SHCOMP rallied by 10.4% and 5.4% respectively. Commodity index rebounded as well which primarily led by metals. Copper went up by 10.2%, aluminum up by 11.2% and zinc up by 14%. Ferrous metals and precious metals followed. Steel increased by 4% while iron ore went up by 5%. Gold gained by 5.7%, outperformed silver which declined by -0.9% for the first time since September 2022.
World economy recovered mildly in January thanks to the easing energy bottleneck in Europe and re-opening of China. Global PMI rebounded to 49.1 from 48.7, first time since May 2022. By regions, US PMI rose to 46.8 from 45.0. Eurozone PMI increased to 50.3 from 49.3, improved for the second consecutive month. China PMI rebounded sharply to 52.9 from 42.6. On the other hand, inflation pressure continued to ease in both US and Europe. Headline CPI fell further to 6.5% and 8.5% respectively in these two regions. Central banks continued to lift interest rate, but with slower pace. Federal Reserve raised interest rate by another 50bps in December and indicated may raise less in next meeting. ECB raised rate by 50bps as well in December though the policy stance against inflation remains hawkish. Dollar weakness continued as investors started pricing in lower interest rate US in second of half of 2023, combined with recovery in both Europe and China.
For the outlook of February, market volatility should rise given still tight labor market in US and uncertainties along with recovery sustainability in both Europe and China. US economy shows resilience despite weak property market. Tight labor market still supports US economy slow down in a manageable pace rather than hard landing. European economy has benefited from easing energy bottleneck. However, the rising interest rate may put the recovery sustainability in doubt. China recovery is like to continue thanks to low base and government support.