Europe: Yesterday, Bloomberg Tv interviewed the president of ECB, Christine Lagarde. Some ECB officials have expressed the opinion that the policy rates of the bank ought to be lowered in the summer. when she was asked about her position on this, Lagarde responded, “I would say it’s likely too.” The greatest risk, she warned, is if the ECB eases policy too quickly and then needs to return to tightening, “because we would have wasted all the efforts that everybody else put in in the past 15 months.” That said, remember that Europe’s inflation rate, released yesterday, was 2.9%, up from 2.4% in November.
Lagarde also said that money markets were “not helping the fight against inflation” since they were overly confident that rate reduction will be implemented this year sooner than anticipated, If this sounds familiar, it is because we have been warning you about it for the last few weeks in this report.
The European session, for the moment, recovers some of what was lost during yesterday’s session, where some European stock markets lost close to 1%. DAX40 is up about 200 points and is now above 16 500.
EE.UU: Let me remind you that today we will have important data: Initial jobless Claims, Fed GDPNow, Crude Inventories & Philadelphia Fed manufacturing index. Tomorrow we will analyze some of their impact.
Geopolitics: Things are not getting any better worldwide. Tensions in the Middle East continue to rise. Following the drone attack on a US-flagged container ship in the Gulf of Aden, the US and the UK conducted a new series of air strikes on Houthi targets in at least five Yemeni provinces.
In addition, Pakistan launched another attack on Iranian territory. According to Anadolu Agency, Pakistani fighter jets and drones flew some 20 km inside Iran to attack terrorist hideouts with modern weapons. According to Iran’s official news agency IRNA, seven foreign nationals were reportedly killed in the attack. Could this be a US-ordered retaliation for Iran’s attacks on opposition close to US troops in northern Iraq and Syria?
Commodities: Overnight, crude oil prices had a slight upward rally, with Brent crude approaching $78.50 a barrel. However, during the European session, we can see that the price has again fallen back by around a dollar.
The apparent lack of response of crude oil to this series of conflicts could be signaling a serious structural problem for the global economy, such as a contraction in fuel demand, which would definitely indicate that the world economy is slowing down and we are entering a period of recession.