📈 Macro-News round-up
MarketNews
🇺🇸 US: The US House passed a law prohibiting TikTok from being distributed in app stores unless its parent firm, ByteDance, ostensibly transferred it to a US-controlled corporation, in the sake of data protection. Senate approval of the programme is still required, and President Biden (who had already stated that he would sign the measure if it reached him) must sign it into law.
💪 In an election year, this is a highly visible indication of US-China tensions, and if the ban is successfully implemented, there is worry that it could set a precedent for similar demands being made to other companies. We anticipate further measures as policymakers attempt to project strength on China in order to win support.
💰 When questioned why the White House’s estimates, which were made public on Monday, indicated notably greater predictions for interest rates in the upcoming years than those from a year earlier, according to US Treasury Secretary Janet Yellen, It is “unlikely,” , that market interest rates would go back to where they were before to the Covid-19 outbreak, which sparked a surge of inflation and increased yields.
🇬🇧 UK: Yesterday, the UK economy brought optimism with some good data. “January saw a pickup in the economy, led by robust growth in the retail and wholesale sectors,” stated Liz McKeown, director of the Office for National Statistics. “Construction also performed well with house-builders having a good month, having been subdued for much of the last year.” GDP dropped by 0.3% in 2023’s last quarter and 0.1% in the previous one, satisfying the commonly accepted technical definition of recession in Europe. Shortly after the GDP numbers were announced, investors increased their bets on a rate drop in June, even though the first one is not completely priced in until August. Sterling declined vs the US dollar and the euro.
🇨🇳 China: Interesting. Analyst teams from different investment banking houses are beginning to disagree on what will happen with interest rates in China. While well-known financial firms are betting on a cut of up to 10 basis points in Q2 and Q3 of this year by the People’s Bank of China, others believe it will wait until the Federal Reserve takes action on the rate cut.
💡 The rationale for waiting makes a lot of sense. Reducing rates prior to a move by the Federal Reserve or other major central banks would increase the gap between yields and might exert further pressure on the currency, which has lost 1.3% of its value versus the US dollar this year despite constant attempts by central banks to support it.
🌐 In other words, the authority’s goal is to stabilise the currency rate in order to prevent more capital flight. Last week, PBOC Governor Pan Gongsheng gave a dovish signal to the market by stating that the bank will maintain the yuan at essentially constant levels and that China has “rich monetary policy tools at its disposal.”
🇯🇵 Japan: The moment of truth is approaching. If the findings of Friday’s preliminary survey on the conclusion of wage discussions by large enterprises show promise, the Bank of Japan may discuss terminating its negative interest rate policy next week, according to sources. The annual wage negotiations for this year began in earnest on Wednesday when Toyota Motor agreed to offer plant workers their largest pay raise in 25 years and opened a new tab. With massive salary hikes, other businesses could decide to follow suit.
💰 In light of this tendency, the BOJ plans to gradually reduce its substantial monetary support. The end of Japan’s negative interest rate policy, which has been in effect since 2016, would signal a historic departure from the BOJ’s expansive stimulus programme and the country’s first interest rate increase since 2007. Not every member of the BoJ agrees. A few members of the nine-member board are concerned about recent poor consumption indicators that underscore how precarious Japan’s economic recovery is.
🌍 Geopolitics: Germany, along with more countries in Europe, is beginning to talk about the reinstatement of compulsory military service. The so-called “peace fund”, ready for approval in the European Union, ironically would allow arms purchases outside the European Union, which could confirm the existence of an interest in the continuation of war as a business.
🔥 Ukraine continues yesterday its second round of attacks on Russian territory with drones and missiles.
🇫🇷 The French left has been divided over the Ukrainian war, endangering the upcoming French elections, where a French national front could sweep over Macron, and remember that the French right does not support the Ukrainian war.
🇷🇺 On the other hand, Russian troops and artillery have been deployed on the border with Finland. In Putin’s own words, they had no problem with this neighbouring country until it joined NATO, now they will have to respond by deploying military force on their borders.
