Key points

• Share markets rallied at the prospect of the US Federal Reserve pausing interest rate increases and hopes that trade talks between US and China may ultimately reach a positive conclusion
• US economic data has continued to paint a picture of an economy in good health, while data in Asia and Europe remains soft. China especially is showing signs of consumer weakness in demand, though this has received a positive stimulatory policy response
• Domestically, the economic outlook is looking softer, though at this point, the transition appears to be from strong to moderate growth

Key developments
Global equity markets rebounded strongly in January, led by the S&P 500 which had its strongest January since 1987. The sharp recovery in risk appetite reflected more dovish statements from the US Federal Reserve (the Fed) which is now expected to pause its interest rate hiking cycle until the cross currents of slowing global growth, market volatility and “tightened” financial conditions pass. A better than expected kick off to the US earnings season further whetted investors’ appetite towards risk assets …