16/01/2023
Market expectations for a soft landing are growing after latest batch of economic reports
Rising economic optimism buoyed stock markets on both sides of the Atlantic on Friday, after eurozone inflation figures and US jobs data boosted hopes of a soft landing this year. But economists warned that while a recent big fall in energy prices has bolstered prospects for 2023, underlying inflation would maintain pressure on central banks to raise interest rates further to keep price rises under control.
Philip Rush, founder of consultancy Heteronomics, said: “Inflation won’t be able to sustainably return to the target until this core problem is conquered.” The headline eurozone inflation figures for December — which fell back into single digits — helped European equities to their best performance in the opening week of the year since 2009 as investors discarded some of their end-of-year gloom.
Goldman Sachs noted that lower wholesale natural gas prices, down over 75 per cent from their peak in Europe, would “boost real incomes; help to push down inflation; and improve government budgets”.
It added a further export boost would come from the end of China’s zero-Covid policy.