Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

Notes from the Trading Desk – Franklin Templeton

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. As part of Templeton Global Equity Group, the European equity desk is manned by a team of professionals based in Edinburgh, Scotland, whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The Digest

Last week equities markets were positive as investors digested a glut of corporate earnings and await several central bank decisions later this week. US stocks outperformed, with earnings a key driver for stock performance throughout last week. It felt quieter in terms of macro news flow, with so much of Asia closed for Chinese New Year and with the Fed in its blackout period. On the week, the MSCI World Index was up 2.2%, the STOXX Europe 600 Index was up 0.7%, the S&P 500 Index was up 2.5% and the MSCI Asia Pacific Index was up 2.1%.

Central banks in focus

This week, investor focus is firmly on central bank meetings, with the Federal Reserve’s (Fed’s) policy meeting on Wednesday, and Bank of England (BoE) and European Central Bank (ECB) on Thursday. These meetings face greater scrutiny, given we have seen signs of inflation peaking in several regions, leading to hopes we may soon see a tilt from some central banks.

The Bank of Canada (BoC) met last week, ahead of the trio of aforementioned central bank meetings, and became the first G10 central bank to suggest it could slow down its hawkish trajectory. The BoC stated that “there is growing evidence that restrictive monetary policy is slowing activity, especially household spending….The governing council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”

Fed: Market consensus is for a slowing in the pace of interest rate hikes, with a 25 basis point (bp) rate hike on Wednesday anticipated. This would take the Fed’s policy rate range to 4.5% – 4.75%. Numerous Fed speakers suggested this before the Fed entered its pre-meeting blackout period, so a different outcome would be a shock. If the rate hike is in line with expectations, the market will be focused on any change in language in the Fed’s official statement, or signals regarding the path of future rate hikes at the press conference with Fed Chair Jerome Powell.

The labour market will be crucial to the Fed’s thinking. US labour conditions remain extremely robust, and any significant weakening in the labour market would likely give the Fed pause in terms of its hawkish path. With that in mind, the release of the January US employment data on Friday will be an important data point to watch. This will be a key barometer for measuring how successful the Fed will be in steering inflation towards 2%, whilst avoiding a hard recession.

ECB: Consensus expectations are for a 50-bps rate hike, taking the ECB main refinancing rate to 3%. Several ECB members have queued up in the last two weeks to outline their hawkish stance. For example, ECB President Christine Lagarde said policymakers must not let up in their battle with inflation, even as the price appears to have peaked, telling a panel at Davos that “we have to stay that course of resilience we observed in 2022”. Recall, the ECB is seen by many to be “playing catch up” as it started to lift rates later than other central banks. The suggested guidance of two 50 bps hikes is largely in line with market pricing.

As we kick off trading this week, the market is digesting some mixed macro data from Europe. Hawks will focus on the higher Spanish Consumer Price Index (CPI) data, with consumer prices in the bloc’s fourth-largest economy rising by 5.8% year-on-year, slightly above December’s 5.5%. Core inflation (which excludes food and energy) also climbed to a new record high of 7.5% from 7.0% previously. On the flip side, German fourth-quarter gross domestic product (GDP) came in worse than expected, at -0.2%.

Thursday’s ECB meeting will also provide more information on the central bank’s quantitative tightening plans, due to start next month.

BoE: The market consensus is for a 50-bps rate hike, taking the policy rate to 4% (vs. 0.1% in 2021). However, some observers think the BoE will opt for a more dovish 25 bps hike. It feels as though the United Kingdom is in a more uncertain situation, with weak macro data and inflation appearing to have peaked but remaining high (CPI 10.5% at last reading). However, BoE Governor Andrew Bailey has stated that inflation is likely to “fall quite rapidly this year, probably starting in the late spring…” prompting some analysts to predict a milder 25-bp rate hike.

The market is actually now pricing in a rate cut by the end of 2023.

The week in review


Last week, the STOXX Europe 50 Index continued its best-ever yearly start, as cyclicals led the way once again. The STOXX Europe 600 Index closed last week up 0.7%. European stocks continued to follow their year-to-date pattern as cyclicals notably outperformed defensives. This rotation now eclipses the November 2020 market rotation that the COVID-19 vaccine breakthrough had triggered. Last year’s underperformers are up year-to-date. Earnings season was the clear focus for markets last week, with earnings reports very mixed so far.

After ending their long run of weekly outflows last week, Europe-focused equity funds saw another inflow this week, with flows of US$3.4 billion into the region.

The year-to-date rotation is still clear when we look at sector performance. Tech stocks outperformed last week, with semiconductors rallying following a positive earnings update for STMicroelectronics, which showed there has been no slowdown in demand. Note, the US Nasdaq Index rose 4.7% last week, so US tech moves helped European stocks, too. Auto stocks were also strong after some positive earnings on Friday helped the auto parts makers. Diminishing odds on a European recession helped bank stocks. Meanwhile, defensives lagged, with utilities, health care and food and beverage stocks lower overall. In terms of other notable movers, European Luxury stocks have been outperformers  year-to-date, along with highly leveraged stocks.

Earnings reports are just getting started, but so far, we have witnessed upside surprises in three out of the four key metrics. Consumer discretionary and consumer staples have been the best-performing sectors and health care has been the worst-performing sector. We have a big week or earnings reports ahead, with 74 of the STOXXX Europe 600 stocks reporting either earnings or sales, so we expect a big week ahead of micro and macroeconomic catalysts.

Looking at macro data, Purchasing Managers Index (PMI) data was a key focus last week, with data from Europe and the United Kingdom diverging somewhat. The euro-area composite PMI jumped from 49.3 to a seven-month high of 50.2 in January. In contrast, the UK composite PMI came in at 47.8.

United States

US markets traded higher last week ahead of the upcoming central bank announcements. The S&P 500 Index closed above 4000, breaking quite firmly above its 200-day moving average, a key technical resistance point. Market bulls prevailed last week, with the main talking points revolving around disinflation momentum, a further slowdown in the pace of Fed tightening, soft-landing hopes, as well as easing cost and supply chain pressures. Cyclicals outperformed defensives last week.

Of note, Tesla shares jumped 33% last week, marking its best weekly performance since May 2013, after reporting better-than-expected fourth-quarter profits. Elsewhere, Microsoft recovered ground to finish the week up 3.3% after warning of a further slowdown in its cloud-computing business.

Bulls celebrated the market momentum at the start of the week. The CNN Fear and Greed Index moved further into Greed territory last week, whilst Bank of America’s Bull and Bear Indicator inched away again from Extreme Bearish territory. However, other surveys show some investors remain cautious about committing new funds to stocks.

Corporate earnings picked up pace again last week, with a few notable reports. Roughly 38.6% of the S&P 500’s market cap has reported so far, with earnings beating estimates overall. Growth stocks are delivering stronger revenue and earnings-per-share growth versus value stocks. This week, 107 companies representing 30.5% of the S&P 500’s market cap will report results, including Apple, Alphabet, Amazon, ExxonMobil, Eli Lilly, Pfizer, Merck and Meta. February 2 is a significant day for US earnings reports, especially the tech sector, coming a day after the latest Fed announcement.

Recent US macroeconomic data appeared to show an improvement too. The core personal consumption expenditures (PCE) report fell to +4.4% vs. +4.7% in the previous report. The Composite PMI number came in ahead of estimates at 46.6. The University of Michigan Sentiment survey improved to 64.9, whilst inflation expectation continued to fall. Fourth-quarter US GDP was also better-than-expected, coming in at +2.9%. December durable goods also beat estimates, coming out at +5.6%. The Philadelphia Fed Index came in at -6.5, not as bad as feared. Finally, pending home sales logged month-on-month growth for the first time in seven months, coming out at +2.5%.


Last week was a stronger, albeit much quieter week in Asia as China was closed due to the Lunar New Year holiday. Hong Kong’s market reopened on Thursday and closed its shortened two-day week up 2.92%, and the Shanghai Composite reopened today up 1.3%.

Stats out of China were positive over the holiday, with more of the population returning to normal in the less restrictive environment.

In India, the Adani Group saga continues, with selling across the board in Adani companies after NY short-selling firm Hindenberg released a scathing research report. The Adani group has now lost about US$66 billion of its market value.

All eyes will be on the central banks in the United States and Europe this week to set the tone and direction of markets.

Hong Kong’s market rose amidst the shortened week on strong tourism and spending data. Auto stocks rallied on the back of TSLA’s strong earnings and good outlook for the electric vehicle sector. Chip names were weaker on Intel’s lower guidance. Finally, photovoltaic stocks were weaker on the news that China is considering an export ban to protect solar tech dominance.

China’s Ministry of Transport released some positive data regarding the holiday period, as many enjoyed a break free from COVID restrictions. All numbers in regards to travelling were up massively.

However, savings levels per household remain elevated, Chinese consumer spending is expected to remain restrained in the near term.

The Financial Times reported that shipping cancellations at China’s largest ports have increased amid weaker overseas demand. While cancellations during the Lunar New Year are normal, this year’s rate will likely be elevated as external demand wanes.

Japanese stocks were strong last week, with the Nikkei closing up 3.12%, as anticipation for positive earnings motivated investors.

Positive fourth-quarter 2022 macro data out of the United States helped sentiment too, raising hopes of a “softer landing”.

Tokyo January CPI came out stronger-than-expected at 4.3%, which puts further pressure on the government to tighten its loose monetary policy.

The Summary of Opinions at the BoJ’s recent Monetary Policy Meeting concluded that it is necessary for the bank to take some time to examine the effects that the modification of yield curve control (YCC), decided at its December meeting, has on market functioning. It stated that it is appropriate to continue with monetary easing at this point, although it is necessary to examine this at some point in the future and assess the balance between positive effects and side effects. These comments continue to fuel rumours of a policy pivot.

As a reminder, BoJ Governor Kuroda’s term of office finishes in April, which may represent an opportunity for PM Kishida to “reset the clock” by appointing a new governor that will ease off on the central bank’s dovish stance.

Looking at sector performance last week, steel stocks led the way higher, followed by machinery, banks and chemicals stocks. Shipping stocks dropped amidst overseas cooling.

The week ahead

As covered already, central banks will be front and centre with the Fed, ECB and BoE.  Before that, we have euro-area GDP figures, euro-area inflation and UK housing data. The week ends with the important US monthly jobs data. In Asia, the fourth-quarter earnings season will likely continue to be a key driver of markets in the coming week.

Monday 30 January    

  • Spain: HICP Inflation
  • Germany: GDP

Tuesday 31 January

  • UK: Net Consumer Credit/Lending Sec. on Dwellings (Dec), Consumer Credit (Dec), Mortgage Approvals (Dec), Money Supply M4/ Ex IOFCs 3M Annualised (Dec)
  • Spain: HICP Inflation
  • Germany: 4Q GDP, HICP Inflation
  • France: GDP, HICP Inflation
  • Italy: GDP
  • Euro area: GDP
  • US: Employment Cost Index, FHFA House Price Index (Nov)
  • China PMI data

Wednesday 1 February

  • UK: Nationwide House Prices
  • Euro area: CPI Inflation Estimate
  • Italy: HICP Inflation
  • US: MBA Mortgage Applications (Jan), Construction Spending (Dec), FOMC Rate Decision Lower Bound/Upper Bound (Feb), Interest on Reserve Balances Rate (Feb)

Thursday 2 February    

  • US: Initial Jobless /Continuing Claims (Jan), Factory Orders Ex Trans (Dec), Durable Goods Orders/Ex Transportation (Dec), Cap Goods Orders Nondef Ex Air (Dec), Unit Labor Costs
  • UK: Bank of England Bank Rate
  • Euro Area: ECB Main Refinancing Rate/ Marginal Lending Facility/ Deposit Facility Rate
  • Germany: Exports/Imports/Trade Balance

Friday 3 February

  • France: Industrial Production, S&P Global France Services PMI.
  • Ukraine and the EC hold a summit to discuss Kyiv’s integration in the bloc, with Ursula von der Leyen and Charles Michel expected to attend.
  • US: Two-Month Payroll Net Revision (Jan), Change in Nonfarm/Private/Manufact. Payrolls (Jan), Unemployment Rate (Jan), Average Hourly Earnings/Weekly Hours All Employees (Jan), Labor Force Participation/Underemployment Rate (Jan)
  • China Caixin PMI


Franklin Templeton Key risks & Disclaimers:

What Are the Risks?

All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.  Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

Past performance is not an indicator or guarantee of future performance. There is no assurance that any estimate, forecast or projection will be realised.

This article reflects the analysis and opinions of Franklin Templeton’s European Trading Desk as of 30th January 2023, and may vary from the analysis and opinions of other investment teams, platforms, portfolio managers or strategies at Franklin Templeton. Because market and economic conditions are often subject to rapid change, the analysis and opinions provided may change without notice. An assessment of a particular country, market, region, security, investment or strategy is not intended as an investment recommendation, nor does it constitute investment advice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy. This article does not provide a complete analysis of every material fact regarding any country, region, market, industry or security. Nothing in this document may be relied upon as investment advice or an investment recommendation. The companies named herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. Data from third-party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered by FT affiliates and/or their distributors as local laws and regulations permit. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction.

Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.


MeDirect Disclaimers:

This information has been accurately reproduced, as received from Franklin Templeton Investment Management Limited (FTIML). No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Information Document (KID), which may be obtained from MeDirect Bank (Malta) plc.

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

Earnings growth not just about tech
All News

BlackRock Commentary: Earnings growth not just about tech

Robust U.S. economic expansion and corporate earnings have bolstered risk sentiment, propelling stocks to record levels, despite notable increases in bond yields. BlackRock anticipates that earnings performance will be crucial in meeting elevated market expectations, particularly following recent data revealing persistent inflation concerns that unnerved investors.

Home loan protection insurance is a must have if you are taking out a home loan, offering the peace of mind that should you pass away during the term of the loan, your loved ones will be able to continue living in their home.
All News

Getting the right insurance to cover your home loan

Home loan protection insurance is a must have if you are taking out a home loan, offering the peace of mind that should you pass away during the term of the loan, your loved ones will be able to continue living in their home.

Experience better Banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. 

Sign up and open your account for free, within minutes.



We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.