On stock markets, prices stabilized in midweek, but the mood remains dominated by geopolitical uncertainties and the imminent interest rate turnaround by the US central bank. The Dow Jones Industrial ended Wednesday's trading +1.79% higher at 33'891.35 points and the market-wide S&P 500 gained +1.86% to 4'386.54 points. On the one hand, the re-scheduled talks between Russia and Ukraine provide hope for an early end to the hostilities and on the other hand, better than expected data from the American labor market data offered reason for a little more confidence. According to the labor market service provider ADP, +475'000 new jobs were created in the US private sector. Analysts had expected +375'000. On the stock markets in Asia, the positive short-term trend continued for the most part on Thursday. Meanwhile, the oil Brent and West Texas Intermediate (WTI) at times reached new highs in midweek. At the same time, the price of gas in Europe climbed to its highest level in around eleven years. Important industrial metals such as aluminum, copper, nickel, and iron are also becoming more expensive.
Federal Reserve Chairman Jerome Powell confirmed yesterday at his hearing in the US House of Representatives the expectation of a first interest rate step at the next meeting of the Monetary Policy Committee (FOMC) on March 16. The high inflation – currently the inflation rate in the US is +7.5% – and the solid labor market justify an interest rate hike. In addition, the central bank balance sheet is to be reduced later in the year. But the Fed will also keep an eye on the impact of geopolitical uncertainties, Powell promised.
The Beige Book – a regular report on the state of the economy in the Federal Reserve System's 12 districts – emphasized the still-acute problems in global supply chains. Overall, the US economy grew “at a moderate to modest pace” during the period, it said. Prices continue to rise at a “robust pace,” according to the Fed, and labor market demand remains strong.
After the first round of direct negotiations between Russia and Ukraine failed to produce results, the warring parties are now scheduled to meet a second time for direct talks. However, the Kremlin continued to call for Ukraine's demilitarization ahead of the talks and stressed that Ukrainian government must recognize sovereignty over the Crimean Peninsula and the two “people's republics” of Luhansk and Donetsk.
Like the European Union before it, the United States is now also closing its airspace to Russian aircraft. Meanwhile, the European Union enacted the exclusion of seven Russian banks from the SWIFT financial communications network. In addition, the EU decided on new sanctions against Russia's ally Belarus. The Belarusian timber, potash and steel industries are particularly affected.
Consumer price inflation in the euro countries continued its upward trend. At +5.8%, the annual inflation rate in February reached its highest level since the introduction of the euro in 1999. Economists had forecast an increase, but not quite as sharp, from +5.1% in January to +5.6%. The main driver remains energy prices, which rose by almost +32% year-on-year. Compared with the previous month, the cost of living in the eurozone also rose more strongly than expected by +0.9% (consensus +0.7%). The core rate, excluding energy prices, was +2.7% in February after +2.3% at the beginning of the year. With the crisis in Ukraine and supply chain problems still persisting, the inflation outlook is likely to remain on the upside, putting even more pressure on the European Central Bank (ECB) to revise its inflation expectations and move away from its expansionary monetary policy.
|08:30||SZ||Consumer Prices (February, y/y)||+1.6%|
|09:15||ESP||PMI Services (February)||46.6|
|09:45||IT||PMI Composite (February)||50.1|
|09:50||FR||PMI Composite (February)||57.4|
|09:55||GE||PMI Composite (February)||56.2|
|10:00||EZ||PMI Composite (February)||55.8|
|10:30||UK||PMI Composite (February)||60.2|
|11:00||EZ||Producer Prices (January, y/y)||+26.2%|
|14:30||US||Initial Jobless Claims (weekly)||232,000|
|14:30||US||Productivity Q4 (q/q, non-farm)||6.6%|
|15:45||US||PMI Composite (February)||56.0|
|16:00||US||ISM PMI Non-Manufacturing (February)||59.9|
|16:00||US||Durable Goods Orders (January, m/m)||-0.4%|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
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