Written by Cormac Nevin.

Global equity markets were broadly flat in local currency terms last week, however there was a significant weakening in the US Dollar vs Sterling and other currencies which left the GBP return for the MSCI All Country World Index down -1.6%.

The weakening dollar was driven by hopes that slowing economic data might prompt the Federal Reserve in the US to slow, pause, or even reverse its path of monetary tightening to combat inflation. This caused a rally in Emerging Market equities and Fixed Income which have come under significant pressure from the incredible strength of the US Dollar over recent years.

This rally was particularly pronounced in China, as the MSCI China Equity Index is up +20.0% for the month of November to date in GBP terms. This rally has been spurred by the unveiling of support for over-indebted property developers by the authorities in Beijing, as well as tentative rumours of a potential relaxing of the economically disruptive COVID-Zero policy. Whether these measures prove substantial and lasting remains to be seen, but they provided enough hope for markets to rally significantly, having taken a significant beating and reaching more attractive valuations.

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