The Monday note - 5 February 2018

• The FTSE 100 fell 222 points last week to close on Friday at 7,443.4. Stronger than expected growth in the global economy has generated concerns among investors that central banks may raise rates sooner and faster than previously expected. 
• The ten year Gilt yield softened to 1.58%, up from 1.29% just a month ago, and back to pre-referendum levels. The US government ten year bond yield stood at 2.85%, up from 2.47% a month ago. 
• The US economy saw 200,000 jobs created in January, exceeding the consensus forecast of 180,000. Wages growth reached 2.9% on an annualised basis. 
• Chinese ecommerce firm, JD.com, is planning to open a research centre in Cambridge, focussing on artificial intelligence and big data. It also plans to open a London office by April. 

Chief Economist comments: 

We have known for some time that the era of very low interest rates was coming to an end, but now there is speculation that rates may normalise sooner than expected. This year, I am forecasting one UK rate hike of 25 basis points, and I am not yet inclined to revise that upwards. The Bank of England has to balance the desire to normalise rates against the uncertainty created by Brexit. Also, in the coming months I see inflation drifting back towards target, so the pressure to act on interest rates is not that high.