Macro-News round-up:
#MarketNews
– China: The gains made by Chinese stock markets last week, prompted by the announcement of the government’s economic stimulus plan and possible rate cuts by the People’s Bank of China, appear to have been short-lived.
A Hong Kong court has ordered China Evergrande, the most indebted property developer in the world, to liquidate after a judge there declared that it was “time to say enough is enough.” Evergrande first went into default in 2021, with over $300 billion in total obligations. However, court cases and restructuring discussions continued since many people were holding out hope that the Chinese government would eventually provide some sort of bailout. Up to 25% of China’s GDP is made up of the construction industry, but the ripple effects of real estate are eroding confidence and many are concerned about how this will affect the economy as a whole. After years of stringent zero-COVID regulations, things have also never fully recovered, and a new crisis might exacerbate a deflationary spiral.
– US: According to a Friday report from the Commerce Department, the personal consumption expenditures price index—the Fed’s favoured gauge of inflation—rose 2.6% in December over the same period last year. The underlying inflation rate is currently less than the central bank’s target of 2% on an annualised basis throughout periods of six and three months.
The yield on the 10Y increased by just 1.9bp, to 4.137%, while the yield on the 2Y increased by 5.6bp. Rate cuts could be priced out further at this week’s FOMC meeting if the March rate cut is retracted, which would increase yields. There is still a little over 50% price in for the March decrease. On Friday, the EURUSD was a little unstable, falling below 1.0820, rising over 1.0880, and then levelling off once more.
– Europe: There is not much data to highlight today on the European continent, however Sweden has published its growth rate, which unfortunately shows the same symptoms as the rest of the Euro zone, stagnation if not recession. The published growth rate shows a quarterly growth of 0.1%, and an annualised growth of 0%.
The rest of the week is going to be important in macroeconomic data. We will have from growth rates of European countries, PMI, rate decisions, and speeches of central bankers. I will leave a calendar below so you do not lose detail of the dates.
– Geopolitics: A drone attack on US forces in northeastern Jordan, close to the Syrian border, by insurgents backed by Iran resulted in the deaths of three US service personnel and the injuries of at least 34 others. In a statement, Biden stated, “We know this attack was carried out by radical Iran-backed militant groups operating in Syria and Iraq, even though we are still gathering the facts.” Tehran was not involved in the incident, according to a statement sent by Iran’s UN delegation on Monday. Three bases were attacked, one of which was near the border between Jordan and Syria, according to the Islamic Resistance in Iraq, an umbrella group of radical militant organisations supported by Iran. Members of Congress are pressing Biden to take an immediate military response against Iran.
The Houthi rebels in Yemen increased their attacks on ships traversing the Red Sea on Friday. One such strike caused a petroleum tanker owned by the trading company Trafigura to catch fire. According to Trafigura, the British tanker Marlin Luanda was hit by a missile while sailing through the Red Sea. According to a Trafigura representative, the tanker was transporting Russian naphtha. The unabated hostilities came alongside soaring tensions between Israel and the United Nations agency for Palestinian refugees, UNRWA, which provides education, health and other services to Palestinians. On Friday the agency said it had sacked several staff whom Israel accused of involvement in Hamas’s 7 October attack. Notably, some Israeli media have even accused the Israeli army itself of firing on civilians during the 7 October attack.
The UN’s Italian reporter in Palestine, Francesca Albanese, has claimed that Israel’s accusations are a retaliation against the ICJ’s (International Criminal Court) response to the failure to dismiss charges of genocide against Israel.
