Macro-News round-up:

– Europe: A new survey released on Friday by the European Central Bank revealed that consumers in the euro zone increased their expectations for inflation in the upcoming year and remained stable for the next three years, providing more proof that controlling price growth may prove challenging in its last stages.

The ECB stated that while inflation dropped quickly last year and is currently just under 3%, it may take more than a year to reach its 2% target. While ECB estimates for the next three years stayed constant at 2.5 percent, the median expectation for inflation over the following 12 months increased to 3.3% in January from 3.2% in December.

Today, Holzmann of the ECB said: I don’t see circumstances for the ECB to cut before the Fed.

Perhaps, for these reasons, the European market is currently trading with setbacks. Once again, without the blessings of central banks, stock markets do not seem to be able to sustain themselves.

– US: Yesterday’s U.S. employment data continues to beat expectations. Unexpectedly, fewer Americans than predicted last week filed new applications for unemployment benefits, indicating that job growth most likely stayed strong in February. The robustness of the labour market, which supports the economy, lessens the need for the Federal Reserve to begin lowering interest rates. According to minutes of the U.S. central bank’s meeting released this week, most decision-makers were worried about the dangers of lowering interest rates too quickly and were unsure of how long borrowing costs should stay at their current level.

Because Fed seem to be in no hurry, Goldman Sachs analysts now project four 25 basis point reductions in interest rates this year rather than the one they had anticipated in May.

Market: The three main American stock indexes surged to new all-time highs on Thursday as Nvidia’s earnings confirmed investors’ belief that advances in artificial intelligence will increase earnings and allow stock prices to rise much further. The Nasdaq 100 shot up 3%, the Dow Jones broke over 39,000 for the first time, and the S&P 500 recorded its twelfth record close of 2024. 

– China: Since Governor Pan Gongsheng entered office last summer, the People’s Bank of China has made a number of surprising announcements. This week, it announced a record reduction to a key lending rate. He stunned everyone last month at a news briefing by drastically lowering the reserve requirement ratio for banks.

On the day of the lending rate drop, the CSI 300 Index gained just 0.2%. Over the next few days, investors’ initial gains following the RRR reduction vanished as they continued to be concerned about economic threats. This year, the yuan has remained steady, hovering around 7.1–7.2. In the other hand, bets of further easing in China have caused the yields on government bonds to decline. 

– Geopolitics: Let’s start with this thought. Nothing happens by chance. It is 2 years since the beginning of the Russian invasion of Ukraine. This conflict has been the necessary catalyst for several pending global objectives. Firstly, to strengthen NATO, given that the budget increase has been brutal, at a time when its very existence was being questioned after the Trump administration. Secondly, it has reconfigured the European budgets, getting Germany to accept a deficit! and has made the proposal of a European army for the first time possible. 

The so-called “war economy”, which was unthinkable in Europe, has come to pass. And policies that would not have been accepted by the citizens are now sold as necessary.

Meanwhile, the world continues to heat up. Citing six sources, Reuters exclusively reported on Wednesday that Iran has given Russia a significant quantity of potent surface-to-surface ballistic missiles. This development demonstrated the growing military collaboration between the two US-sanctioned nations.  “We have no reason to believe that the Iranians will not follow through on their clear indication in this press reporting that they will ship ballistic missiles to Russia,” John Kirby of the White House stated.

He continued, “We will bring this issue before the UN Security Council on our behalf. “We are going to impose further sanctions on Iran. Additionally, we will work with our partners and allies in Europe and beyond to organise additional response options”.