📊 Macro-News round-up
#MarketNews
🏴 Last week, The Governor of the Bank of England, Andrew Bailey, mentioned that the British economy is approaching a stage where interest rates can be lowered. This time, no member of the BoE’s monetary policy committee voted in favor of raising rates, confirming that inflation does not appear to be risky at present. The Bank of England stated that rate cuts may not significantly impact monetary policy restrictions. They also highlighted the tight labour market, with an unemployment rate below 4%, similar to the United States. The pound’s response was a downtrend against the USD. 💷📉
🇨🇭 In Switzerland, the Swiss National Bank surprisingly reduced interest rates, impacting USDCHF. 🇨🇭💰
🍏📈 In Wall Street, Apple faced a significant market capitalization loss due to legal accusations of violating antitrust law. 📉🍏
🌍🇺🇸🇪🇺 US PMIs indicated economic strength, while Europe’s French and German PMIs remained below 50. The United Kingdom showed better PMIs, similar to the United States. Japan’s export data improved, and the Bank of Japan raised interest rates while continuing to buy Japanese bonds. Japan’s core inflation rose to 2.8%, requiring the Bank of Japan to manage financial equilibrium and control inflation simultaneously. 📊
🇯🇵📈🇸🇬 Following last week’s inflation spike in Japan, this week we have an inflation spike in Singapore. In February, the core inflation rate increased by 3.6% from the same month last year, surpassing both the 3.1% recorded in January and the 3.4% predicted by a Reuters survey of experts.
🇺🇸 US Core PCE inflation data will be released on Friday. These numbers may have an important impact, considering that we are in a moment of transition in monetary policy.
A change in the script could cut short the bull market, which is overly optimistic about a rate cut.
🌍 Unemployment rates remain low, so Western central banks are likely to cut rates very slowly and slowly, fearing that too rapid a rate cut could reawaken inflation.
Against the official discourse or narrative, Bostic, Goolsbee, and Cook recently said that the Fed might just make cuts once this year is out. On Friday.
🇯🇵 Japan’s central bank rate moves could cause liquidity problems for European bonds. A routers article suggests that there will be an adjustment in the flow of capital between Europe and Japan as the latter starts to raise interest rates and the European Central Bank starts to lower them. In Europe, the current interest rate is at 4%, but the European Central Bank is expected to start lowering them from 3% later this year. Meanwhile, the Japanese Central Bank has raised the interest rate to the 0 – 0.1% range, but the target is to end the year at around 0.25%.
💼 Given the current numbers, this scenario makes sense. Europe’s inflation rate appears to have calmed down, although it remains sideways at below 3%. However, in Japan, the inflation rate has rebounded to 2.8% from 2% the previous month, indicating a bad trend that would force the Bank of Japan to continue raising rates.
📉📈 Japanese investors are the largest holder of foreign bonds. It is possible that, given the scenario described above, they will begin to sell European bonds en masse, recapitalizing their money into Japanese deposits and bonds as rates rise in the country.
🇯🇵💼🇪🇺 More selling will occur when the 30-year JGB yield approaches 2%, a level he anticipates being reached later this year, according to Nomura Chief Rates Strategist Naka Matsuzawa, as reported by Reuters. Right now, it stands at 1.8%. “The lifers no longer really have to keep money in the other markets once the 30-year JGB yield gets back to that level,” he stated, alluding to the asset-liability calculations made by life insurance. Matsuzawa stated, “The French treasury department keeps asking us what the Japanese flows are, so they must be concerned.” The bank is asked inquiries primarily about French debt auctions.
💥 Geopolitics: On Friday night we witnessed a series of terrifying attacks in different parts of the city of Moscow, Russia. Several gunmen fired indiscriminately at innocent civilians. The U.S. embassy had warned days earlier that imminent attacks were expected in Moscow in public places. The attack was quickly attributed to ISIS.
🇷🇺 Russia, which caught several of the terrorists as they fled to the Ukrainian border, is still investigating the perpetrators. Initial Russian suspicions are that they may have been supported by the Ukrainian forces.
⚔️ European leaders are refraining from making statements on the authorship of the attacks. Speculations may reach delicate conclusions, especially considering ties between the U.S. administration and radical Islamist groups since the 1970s. In the past, Donald Trump publicly accused Obama and Hillary Clinton of being behind the creation of ISIS. Both have admitted on several occasions that the U.S. has trained and armed these groups. Clearly, the biggest threat is that Russia may come to dangerous conclusions.
One thing is certain, as the defeat of the Ukrainian army seems closer, destabilizing events are multiplying.
📆 Important Events this week:
#Monday
Europe: Lagarde speaks.
US: New home Sales.
#Tuesday:
Japan inflation.
Spanish GDP.
US: Consumer Confidence.
#Wednesday:
Sweden: Interest Rate decision.
Spain inflation
US: Crude oil inventories, Fed Waller speaks.
#Thursday:
UK: GDP.
Germany Unemployment Rate.
US: GDP, Initial jobless claims.
Japan: Tokyo core inflation, Industrial production.
#Friday:
France inflation.
US: PCE inflation, Powell Speaks,
