China's economy is recovering. Inflation is slowing in the United States

Inflationary pressures in the United States are easing. The latest data showed that consumer prices fell from 6.4% to 6.0% year-over-year. Core inflation (which excludes food and energy prices) has declined from 5.6% to 5.5%. This raises the possibility of a small interest rate hike by the Federal Reserve next week. As the stock market closed on Tuesday, the Dow Jones Index (US30) increased by 1.06%, and the S&P 500 Index (US500) added 1.65%. The NASDAQ Technology Index (US100) gained 2.14% yesterday.

According to the CME FedWatch tool, most futures traders expect a quarter-point hike next week, though 31% of traders are betting that the Fed will hold off on raising rates.

After the Silicon Valley Bank collapse, a wave of customers applied to transfer their accounts to major US banks such as JPMorgan Chase & Co (JPM) and Citigroup Inc (C). The US government's emergency measures to prevent the collapse of regional banks have not stopped depositors from trying to transfer their accounts to larger banks. Thus, regional banks may suffer even more in the coming days and weeks.

Equity markets in Europe rose yesterday. German DAX (DE30) jumped by 1.83%, French CAC 40 (FR40) gained 1.86%, Spanish IBEX 35 (ES35) added 2.19%, and British FTSE 100 (UK100) closed up by 1.17%.

European bond yields fell further as investors bet on the European Central Bank's (ECB) easing of policy tightening. Traders are now estimating a 25 basis point increase as the most likely outcome of this Thursday's ECB policy meeting. But the latest inflation data is not conducive to that. Spain's annualized inflation rate rose from 5.9% to 6.0%. Meanwhile, core inflation (which excludes food and energy prices) also added 0.1% last month. The data point to sustained inflationary pressures. A number of other European countries will release consumer price data this week, followed by the overall figure for the Eurozone on Friday.

Portugal announced a rash of measures Thursday to address the housing crisis, including ending the Golden Visa scheme and banning new Airbnb licenses for short-term rentals. Rents and housing prices have risen sharply in Portugal, which is one of the poorest countries in Western Europe. Last year, more than 50% of workers earned less than 1,000 euros a month, while rents in Lisbon alone jumped by 37% in 2022. To solve the housing shortage, the government will rent vacant homes directly from landlords for five years and put them on the rental market.

Oil fell to a three-month low due to concerns about inflation and US bank closures. It was the biggest one-day percentage decline since early January. Moreover, both contracts also fell into a technical oversold zone for the first time in weeks.

Asian markets were mostly down yesterday. Japan's Nikkei 225 (JP225) decreased by 2.16%, China's FTSE China A50 (CHA50) fell by 0.64%, Hong Kong's Hang Seng (HK50) ended the day down by 2.27%, India's NIFTY 50 (IND50) fell by 0.65%, and Australia's S&P/ASX 200 (AU200) ended Tuesday down by 1.41%.

In China, the latest economic data showed that industrial production rose by 2.4% last month (expectation of 2.6%). The improvement in production from the previous month indicates that industrial activity is still recovering after the country's zero COVID policy was lifted. Retail sales also rose, indicating that consumer spending is also on the road to recovery. Fixed-asset investment rose by 5.5% in February (expected 4.4%). This indicates that businesses are investing heavily in anticipation of an economic recovery this year. The unemployment rate rose slightly, from 5.5% to 5.6%. Overall, the economic data showed that the country's recovery is gaining momentum, but not at an even pace.

The minutes of the Bank of Japan's monetary policy meeting showed that it is important to continue easing monetary policy. The BoJ expects the economy to recover this year, and inflation is likely to slow down by the last half of the next fiscal year.

New Zealand's balance of payments deficit reached its highest level in 34 years. The deficit between what the economy earns and what it spends reached $33.8 billion for the year, a record 8.9% of GDP. The increase in the deficit is mainly due to increased imports of goods and services. The size of the balance of payments deficit matters to the rating agencies, which could downgrade New Zealand by making borrowing more expensive if there are fears that the situation will get out of hand.

S&P 500 (F) (US500) 3,919.29 +63.53 (+1.65%)

Dow Jones (US30)32,155.40 +336.26 (+1.06%)

DAX (DE40) 15,232.83 +273.36 (+1.83%)

FTSE 100 (UK100) 7,637.11 +88.48 (1.17%)

USD Index 103.67 +0.08 +0.08%)

• – Japan BoJ Monetary Policy Meeting Minutes at 01:50 (GMT+2);
• – China Retail Sales (m/m) at 04:00 (GMT+2);
• – China Industrial Production (m/m) at 04:00 (GMT+2);
• – China Unemployment Rate (m/m) at 04:00 (GMT+2);
• – French Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
• – UK Annual Budget Release at 14:30 (GMT+2);
• – US Producer Price Index (m/m) at 14:30 (GMT+2);
• – US Retail Sales (m/m) at 14:30 (GMT+2);
• – US NY Empire State Manufacturing Index (m/m) at 14:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 16:30 (GMT+2);
• – New Zealand GDP (q/q) at 23:45 (GMT+2).

by JustMarkets, 2023.03.15

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.