📊 Macro-News round-up
#MarketNews
🌍 Europe: Yesterday, Sweden’s GDP rate was published, indicating a GDP contraction of -1.1% annualised. Inflation in Spain was released, showing a rate of 3.3%, which would suggest sticky inflation. For Germany, their inflation rate improved, falling to 2.2% vs. an expected 2.3%, very close to the 2% target.
🔍 Ahead of Tuesday’s inflation data in the Euro zone, markets expect the European Central Bank to go ahead with the rate cut plan. According to Vice President Luis de Guindos, there are major obstacles in the way of the ECB reaching its inflation target. Data that are anticipated on Tuesday should support the need for caution as they show that euro-area inflation remained stable at 2.4% this month, despite officials’ long-standing warnings that the return to 2% would not be easy.
📉 Deflation in UK: The British Retail Consortium said on Tuesday that non-food prices decreased by 0.6% in the first week of April. The latest period of deflation in this category lasted from June 2019 to December 2021, after which prices increased as a result of post-Covid spending, shortages in supplies, and Russia’s invasion of Ukraine. The data supports forecasts that the Bank of England will reduce its benchmark lending rate from 5.25%, which is a 16-year high. However, only two reductions are priced in by markets this year. Next Thursday, lawmakers will meet on Threadneedle Street to decide on rates. The equation is simple, when inflation falls below the wage rate, retail sales will tend to rise.
🇯🇵 Japan: Japan’s industrial production, released early this morning, shows an increase of 3.8%, bettering the forecast of 3.4%, and recovering from the previous period’s negative data of -0.6%. Good macroeconomic data in Japan could add confidence for the Bank of Japan to raise interest rates and normalize its weak currency, which just yesterday fell to a record low against the USDPJY @160, not seen since the 1990s.
🇺🇸 Especially important is the fact that the Federal Reserve will decide interest rates on Wednesday. If for some reason, it takes a hawkish stance, or sends a hard message to the market, the dollar will be strengthened, and this could drag the Yen even further, pushing the USDJPY pair even above the aforementioned record levels.
🇨🇳 China: Following US Treasury Secretary Janet Yellen’s statement to Communist Party leaders in Beijing that China’s overcapacity was a global issue, which German Chancellor Olaf Scholz repeated a few days later, Xi is now on a tour of Europe. Chinese President Xi Jinping will leave on May 5 on a five-day tour that includes stops in France, Serbia, and Hungary, according to Bloomberg. Xi’s first trip to the EU in five years will be this one. Xi is traveling in order to communicate that China offers the EU a far better economic future than the US is prepared to admit.
📈 Despite the EU’s ongoing investigations into Beijing’s industrial policies and warnings from US officials about potential risks, Xi will be visiting countries that are keen to gain investments from China. President Emmanuel Macron and Xi are anticipated to talk about climate change and economic cooperation while in France.
🇨🇳 In April, China’s manufacturing activity grew more slowly than it did in March. According to the report, a strong rise in new export orders was the main factor behind China’s manufacturing PMI (Purchasing Managers’ Index) growing at its highest rate in 14 months in April. Nonetheless, the overall economic momentum is still fragile since poor domestic demand and the real estate market collapse are still impeding growth. According to the Caixin/Markit Manufacturing PMI survey, China’s factory activity grew more slowly in April than it did in March. The slower pace of growth in both the manufacturing and services sectors in April indicates that the recovery remains uneven and fragile.
💹 Equity: Seoul market saw a rise in Samsung shares. An increase in expenditure on AI services led by corporations such as Microsoft and Alphabet allowed its semiconductor sector to generate a profit again. Today we will see the results of Amazon, one of the giants of the US tech sector. In addition, Apple will also report its results on Thursday, so the bullish momentum of last week’s techs, except for Meta, could continue. In Europe, we will follow the results from Mercedes, Lufthansa, Air France-KLM & Adidas.
🌍 Geopolitics: Climate scientists are urging the EU to “embrace” deindustrialization rather than subsidize uncompetitive businesses, while industrial production in the major European countries has been continuously declining.
🔍 According to an essay published in Euractiv, the EU ought to think about partially green relocating goodslike ammonia rather than attempting to preserve current domestic supply chains in light of competition from nations with inexpensive renewable energy.
🌍 As Secretary Blinken begins his Middle East tour to find a peace deal between Israel and the hunt, and his European counterpart, EU Foreign Secretary Borrell, does the same by meeting with Arab ministers in Riyadh, US universities are in chaos in the face of massive student protests. Harvard University has taken down the US flag and put up the Palestinian flag. This youth unrest has also spread to Europe, where the Sorbonne University has also started corresponding protests in support of the Palestinian people.
🗳️ These movements could damage the weak electoral position of the current US president, Joe Biden. To draw a simile, one could say that the protests in support of the Palestinian people are like the BLM protests that took place during the Trump era. At the time, this movement was supported by the Democratic party; however, the Republican party does not support protests in support of Palestine. We will see how this impacts the election polls in the world’s largest economy.
