Macro-News round-up:
#MarketNews

– Europe: According to Reuters last week, the German federal government cut its growth prediction from 1.3% to 0.2% because of the weak global economy and a decision by the German constitutional court that severely damaged the nation’s budget.

– US: The impact of higher than expected inflation continues to scare Wall Street. The SP500 has not yet managed to regain 5,000 points.

Since June, the annual increase in the CPI has varied between 3% and 3.7%. Said another way, nothing is improving. The inflation rate had been gradually falling since the middle of 2022 until June. Therefore, inflation may be becoming stagnant.

Additionally, from December to January, consumer prices increased by 0.3%, the largest monthly rate since September.

With prices up 0.7% for the month and 4.9% more than a year ago, services saw practically all of the inflation. Labour costs are on the rise and services are often labor-intensive. For the Federal Reserve, this is the matter.

Today will be an interesting day, as we will have the FOMC Meeting Minutes. Maybe we will get some news in this regard.

– Canada: CPI rate lower than expected, with an increase in January of 0% against the 0.4% expected. The annualised rate stands at 2.4%.

– Japan: Japan’s exports increased more than anticipated in January due to Chinese demand for chip-making equipment and auto and auto part shipments to the United States.

According to Ministry of Finance figures released on Wednesday, Japan’s exports increased 11.9% in January over the same month last year, outpacing the 9.5% increase predicted by Reuters pollsters and the 9.7% growth in the prior month.

In contrast, it is more likely that a declining yen has contributed to the increase in export values than increased demand. In fact, we have recently cited the record levels the USDJPY pair is reaching, not seen since the late 1980s, with the exception of the dollar’s incredible rally in 2022. It is currently trading above USDJPY 150.

– China: A Deloitte study mentions the next challenges facing the Chinese economy in the future. The population of working age is quickly declining, and this trend is predicted to last for a very long period. Pressure is applied not only to health care and retirement but also to economic growth.

By 2100, China’s population is expected to have decreased from approximately 1.4 billion people in 2010 to 525 million, according to the Shanghai Academy of Social Sciences (SASS). This type of population reduction is unheard of in human history, barring conflict, famine, or plague. According to the SASS, there would be 210 million people of working age in 2100, an 80% decrease from the current number. 

A decrease in the working-age population inevitably indicates sluggish economic growth in the absence of a counterbalancing acceleration in labour productivity. Over the past few decades, migration from rural to urban areas and a significant influx of foreign investment have both significantly boosted productivity growth. Both are now in decline.

This is not good news for productivity growth acceleration. Furthermore, it is not encouraging for productivity growth that the state sector, which has historically experienced weaker productivity growth than the private sector, is receiving more attention.

Finally, A decreasing Chinese population will result in a decline in the market for mineral and agricultural products. Global commodity markets and prices will be impacted as a result.

– Geopolitics: Ulf Kristersson, the prime minister of Sweden, will visit Budapest on Friday to meet with Viktor Orbán, the prime minister of Hungary, before the parliament’s long-awaited vote on Sweden’s NATO membership proposal takes place on Monday. Hungary is the only NATO member that has not yet ratified its membership. Orbán’s Fidesz party, in power, has continuously postponed a vote, claiming complaints over Sweden’s criticism of Budapest’s record of upholding the law.

The Hungarian president, seeking some benefit for his country in exchange for accepting Sweden into the alliance, seems to have succeeded. This week, the Hungarian news outlet Index.hu announced, citing anonymous sources, that Sweden and Budapest may sign a new defence agreement.

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