In the United States, the Conference Board's consumer confidence report for March will be published.Earlier, a similar study by the University of Michigan showed a marked deterioration in sentiment caused by political uncertainty. The head of the Federal Reserve Bank of New York, John Williams, will also give a speech today.The IFO business activity index will be published in Germany. Investors are waiting to see if it will confirm the positive signal from the manufacturing PMI or repeat the decline in the services sector.Sweden will release producer price index data for February. The focus of attention will be on the sub-component of the domestic supply, which most accurately correlates with consumer prices.The Hungarian Central Bank will make a decision on the rate today. The regulator is expected to keep it at 6.50%, which is in line with the market consensus forecast.The People's Bank of China will make a decision on the key rate (1-year rate on medium-term loans). It is expected that it will remain unchanged, as the Central Bank of China is currently taking a wait-and-see attitude ahead of a possible rate cut by the US Federal Reserve.Eurozone: mixed PMI dataThe eurozone PMI for March was weaker than expected, although it generally reflected moderate economic growth. The composite index rose to 50.4 (expected 50.7), which is higher than the February reading of 50.2. The main growth was provided by the manufacturing sector, where the PMI unexpectedly rose to 48.7 (expected 48.2). However, the service sector disappointed, falling to 50.4 (forecast of 51.1, previous value of 50.6).Overall, the PMI data signals a positive start to 2025, with expected GDP growth of 0.2% QoQ. However, these data do not provide clear signals for the ECB's April rate decision, and the market has not changed its expectations yet.USA: industrial downturn amid tariff risksThe preliminary US PMI for March fell to 49.8 from 52.7 in February, reflecting a slowdown in business activity. The data shows the opposite trend compared to the eurozone.The manufacturing PMI returned to the contraction zone again amid uncertainty around trade tariffs, which was reflected in rising commodity prices and lower order volumes and employment. At the same time, the service sector showed a solid recovery, rising to 54.3 (from 51.0).The market reaction to this data was mixed. The EUR/USD exchange rate declined slightly, and the US stock markets played back positive expectations for easing trade restrictions. Donald Trump said that car tariffs will be introduced, but not all measures will take effect on April 2. It is possible that some countries will receive exceptions, which keeps the uncertainty around the US trade policy.UK: PMIs beat forecasts, supporting the poundThe preliminary PMI indices for March in the UK turned out to be better than expected, which led to a decrease in the EUR/GBP exchange rate. The composite index rose to 52.0 (expected 50.5), while growth in the service sector was particularly strong — 53.2 (forecast 51.0). At the same time, the industrial sector continues to experience difficulties, its PMI was 44.6 (47.2 expected).Despite the weak February data, employment figures began to improve. However, this increase should be interpreted with caution due to the increase in the national insurance contribution of employers since April. Pressure on prices in the service sector is decreasing, while the situation in industry remains ambiguous. In general, the data supports the scenario of a gradual easing of the Bank of England's policy with quarterly rate cuts.The geopolitical situationFollowing the talks in Saudi Arabia, the United States and Russia continued discussions aimed at establishing a maritime truce in the Black Sea ahead of negotiations on a broader ceasefire in Ukraine. Despite US optimism, the ongoing strikes between the sides highlight the fragility of the 30-day ceasefire.European countries remain skeptical about Russia's willingness to make real concessions, which increases uncertainty around possible agreements. A meeting of the US and Ukrainian delegations is scheduled in Saudi Arabia today.Stock markets: optimism amid lower trade risksEncouraging news about a possible easing of tariffs led to a rise in US stock indexes:• S&P 500 +1.8%• Nasdaq +2.3%• Russell 2000 +2.6%Investors took advantage of the moment to buy, especially the activity was high among Mag 7, which made this the best day for the group since January. Tesla became the main growth leader, adding 12%.In Europe, stock indexes remained at the same levels, despite the positive PMI data. However, activity in cyclical sectors such as banks and commodity companies indicates a latent increase in interest in risky assets.Nevertheless, optimism is waning today: Asian markets are showing multipolar dynamics, and futures on American and European indices are declining.Bonds and the foreign exchange market• The US indices showed growth, and the S&P 500 closed above the 200-day moving average again, which is associated with hopes for a reduction in tariff pressure.• US and European bond yields rose slightly, while spreads to peripheral assets narrowed in Europe.• The EUR/USD pair continues to trade around 1.08, and the improvement in market sentiment has put pressure on the yen.• In Canada, Prime Minister Mark Carney announced early elections on April 28, but the reaction of the foreign exchange market was restrained, as this step was expected.• The Norwegian krone was supported by rising oil prices, and EUR/NOK dropped below 11.40.• The Swedish krona strengthened and ended yesterday's session at its lows since the end of 2022, breaking the 10.90 mark.ConclusionsFinancial markets remain in a zone of uncertainty:• In the US, PMI data show a slowdown in industry, but growth in the services sector is still offsetting the negative effect.• In Europe, the PMI confirms a modest improvement in the economy, but does not provide clear signals for the ECB.• Geopolitical factors remain a key risk for the markets, despite the truce talks.Today, investors' attention will be focused on data on consumer confidence in the United States, as well as decisions by the central banks of Hungary and ...
Eurozone: impact of PMI on ECB decisionAn important event this week will be the publication of preliminary PMI indices for March in the eurozone. The data may influence the decision of the European Central Bank on interest rates in April.The composite PMI is expected to rise from 50.2 to 50.6 due to the stabilization of the manufacturing sector. The manufacturing PMI is likely to rise from 47.6 to 48.4, while the indicator of business activity in the service sector will remain at 50.6.The dynamics of the PMI historically correlates with the ZEW index, which also rose in March, which may indicate an improvement in economic expectations.USA: weak dynamics in the manufacturing sectorIn the US, preliminary PMI data for March will also be published. Earlier, regional leading indicators pointed to a slowdown in industrial growth after the winter recovery, which may increase investor concern.The calendar of macroeconomic events in the United States for the current week is quite light. The Conference Board consumer confidence index will be released on Tuesday, and the core PCE price index, which is a key indicator of inflation for the Fed, will be released on Friday.China: stable monetary policy of the People's BankThis week, the People's Bank of China will make a decision on the key interest rate (1-year rate on medium-term MLF loans). It is expected that it will remain unchanged, as the regulator is not in a hurry to take active measures, awaiting further actions by the US Federal Reserve System. With a stable USD/CNY exchange rate, the Chinese Central Bank is more likely to focus on changes in the Fed rate, using alternative mechanisms to support the economy, such as targeted loan programs.Market overview: key events• Japan: The PMI indices for March were worse than expected. The manufacturing PMI dropped to 48.3, the lowest level in a year, while the services index fell to 49.5, dropping below 50 for the first time since August 2020. The head of the Bank of Japan, Kazuo Ueda, confirmed his readiness to raise rates if core inflation approaches 2%. Two increases of 25 bps are projected in 2024, the next one in July.• USA: Fed members continue to make cautious comments on the regulator's policy. The head of the Federal Reserve Bank of New York, John Williams, said that a moderately restraining policy remains relevant. The Fed is still considering the first rate cut in June, followed by quarterly adjustments of 25 bps to the target range of 3.00–3.25% by June 2026.• Eurozone: The consumer confidence index fell from -13.6 to -14.5 in March, which is a negative signal for the ECB before the April meeting. The deterioration in household expectations calls into question the recovery in private consumption that the regulator is counting on.• Germany: The Upper House of Parliament has approved a large-scale fiscal stimulus package, including 500 billion euros for infrastructure, increased defense spending and easing regional budget constraints. These measures can accelerate economic growth, but also increase inflationary risks.• Canada: Prime Minister Mark Carney announced early elections on April 28. Initially, the Conservatives had a significant advantage, but the influence of Donald Trump reduced their gap.Geopolitics: Ukraine negotiations and trade risksConsultations between the United States and Ukraine on energy security and protection of critical infrastructure have begun in Saudi Arabia. Washington expects to conclude a 30-day truce by April 20, but the overnight strikes by both sides show that the situation remains unstable.In addition, Donald Trump confirmed that a new system of reciprocal tariffs will be announced on April 2, which could significantly affect global trade. It remains unclear exactly how the tariff regimes will change, but earlier Trump compared the VAT system in the EU with the actual trade barriers for the United States.Stock markets and currencies• Stock markets: Global indexes ended Friday in a slight negative, but the week as a whole turned out to be positive due to reduced concerns about tariffs. American technologies showed growth: Nasdaq +0.5%, S&P 500 +0.1%, Dow +0.1%. Asian markets are trading in different directions this morning, and futures on European and American indices indicate growth.• Forex: The US dollar ended the week with a strengthening, increasing in price for the third day in a row. EUR/USD briefly dropped below 1.08, but closed slightly higher. Despite the strength of the dollar, the Norwegian and Swedish krona strengthened, EUR/SEK fell below 11.00, and EUR/NOK — to 11.40.Current market conditions remain volatile, and the coming weeks will show how much the Fed's policy, trade risks, and geopolitical tensions will affect asset ...
Betting decisions: key events of the dayToday, the markets are focused on the decisions of three Central Banks at once — the Bank of England (BoE), the Swiss National Bank (SNB) and the Riksbank.The Bank of England is expected to keep the rate at 4.50%, which is in line with analysts' forecasts and current pricing in the market. The regulator's rhetoric is likely to remain unchanged, emphasizing the need for a gradual easing of monetary policy.In turn, the SNB is likely to cut the rate by 25 bps, to 0.25%, given the low inflation risks and weak dynamics of price pressure. Market expectations are also leaning in favor of a reduction, putting about 20 bps of mitigation in prices.The Riksbank is likely to leave the rate unchanged at 2.25%. However, there is a possibility of softer rhetoric, which may come as a surprise to the markets, given that the current market assessment suggests the possibility of a further step towards a rate hike.A Regional review of Norges Bank is also being released today. Investors will closely monitor GDP growth forecasts for the first and second quarters. According to preliminary data, economic activity is likely to remain in the range of 0.3–0.4% QoQ, which corresponds to the regulator's forecast made in December. However, special attention will be paid to capacity utilization indicators, as they play a key role in forecasting inflation and the subsequent trajectory of interest rates.Overview of economic events and market newsChina: sability of monetary policyThe People's Bank of China left key rates at the same levels: 1-year Loan Prime Rate — 3.10%, 5-year Loan — 3.60%. The decision was expected, but the market reaction remained restrained. The published economic data show a mixed picture of the state of the Chinese economy at the beginning of the year.The Fed's decision and the markets' reactionThe Fed, as expected, kept the rate unchanged. Jerome Powell presented a balanced statement, highlighting the existing risks, but at the same time making it clear that the regulator was in no hurry to change policy. As a result of this:• U.S. government bond yields have declined,• The dollar weakened,• Stock markets have strengthened.We still expect the first rate cut to take place in June, and the Fed may conduct three rounds of easing in total this year.Ukraine: negotiations with the United StatesThe telephone conversation between the Presidents of Ukraine and the United States was an important step in discussing long-term security guarantees. The main focus was on the prospects for a settlement of the conflict and a possible truce. However, at this stage, no real agreements on Ukraine's security have been reached yet.Stock market dynamicsGlobal markets ended the trading session with growth. In the US, indexes closed near daily highs as investors reacted positively to the outcome of the Fed meeting.• Dow Jones +0,9%• S&P 500 +1,1%• Nasdaq +1,4%• Russell 2000 +1,6%European markets have seen profit-taking after recent growth, especially noticeable in Germany, where the DAX has gained 17% since the beginning of the year.In Asia, trading takes place in different directions: the Japanese and Chinese markets are showing a decline, while the rest of the sites are mostly growing.European index futures are stable, while US futures indicate a possible continuation of growth, especially in the technology sector.Currency and debt marketsThe decisions of the Fed and the Bank of Japan led to a weakening of the dollar against the yen: USD/JPY fell below 149 after a decline in US bond yields reinforced the bearish trend against the dollar.EUR/USD remained near 1.09, while EUR/SEK rose above 11.00 again ahead of the Riksbank ...
Germany: voting on fiscal packageA vote on a package of fiscal measures is scheduled in the Bundestag today, and the document is due to be considered in the Bundesrat on Friday. The package is expected to be approved.CDU/CSU leader Friedrich Merz declared unanimous support for the initiative, but there are risks that not all party members will vote in favor.In addition, the Free Voters of Bavaria party may not support the bill when voting in the Bundesrat.USA and Russia: negotiations on UkraineUS President Donald Trump has announced plans to hold talks with Russian President Putin on ending the conflict in Ukraine. The discussion is likely to touch on the issue of territorial concessions from Ukraine, as well as the transfer of control over energy facilities, which Trump has previously expressed. At the moment, Ukraine has agreed to a 30-day truce.Japan: Bank of Japan meetingThe Bank of Japan will end its two-day monetary policy meeting overnight. It is expected that the regulator will keep the interest rate unchanged, as the unexpected increase in January, trade tensions and the strengthening of the yen have already had an impact on inflation. However, given the likely increase in wages this year, the Bank of Japan may find opportunities to raise rates further in the summer.Overview of key economic events and market newsThe situation in the Middle EastIsrael carried out its largest attack since the January truce, hitting several Hamas targets. Prime Minister Netanyahu's office said it was in response to the group's refusal to release the remaining hostages. Before the strike, the Israeli authorities held consultations with the White House administration.US retail Sales dataThe February statistics on retail sales in the United States gave mixed signals. The indicator of the control group increased by 1.0% (forecast: 0.3%) after falling by 0.9% in January. However, the overall indicator increased by only 0.2% mom after a 0.9% decrease in January. The exclusion of volatile categories improved the picture: the control group showed an increase of 1.0% against the previous decline of 1.0%. However, the effect of seasonal adjustments could artificially increase the growth rate, which confirms the decrease in the annual rate (+0.3% yoy versus +4.1%). After the release of these data, the EUR/USD exchange rate declined.The economic situation in ChinaThe January-February data showed a solid start to the year, although some weaknesses remain. Industrial production exceeded expectations, increasing by 5.9% YoY (forecast: 5.3%). This growth explains the recent rise in metal prices. A more important signal was the improvement in consumer demand: retail sales increased by 4% YoY (forecast: 3.8%). Despite the positive dynamics, the level remains below 7-8% of the pre-pandemic period. Boosting domestic demand is now a top priority for the Chinese government.Financial marketsStock indexesGlobal stock markets mostly showed growth. In the United States, the S&P 500 and Nasdaq indexes recorded their first two-day gains since the record close on February 19. However, macroeconomic statistics did not support this growth. The Dow Jones index rose 0.9%, the S&P 500 by 0.6%, the Nasdaq by 0.3%, and the Russell 2000 by 1.2%.Positive sentiment prevailed in Asian markets, with the Hang Seng index reaching a new high since the beginning of the year. At the same time, Indonesia's economy is experiencing difficulties, which has led to the sale of assets and the temporary suspension of trading. In Europe, futures are showing growth amid expectations of a vote in the Bundestag, while American futures are showing a decline.Bonds and the foreign exchange marketBond yields on both sides of the Atlantic declined ahead of the German vote and amid relatively stable market sentiment. The EUR/USD pair was trading around 1.09, remaining close to last week's highs. EUR/SEK held above 11.00 as investors assessed the impact of increased government loans amid increased defense ...
The annual compensation of CEOs in the United States is breaking records, despite a shortage of workers and inflation. According to MyLogIQ (a provider of analytical products of the U.S. Securities and Exchange Commission), the median salary of executives from the S&P 500 companies reached $14.2 million last year. The salary growth of the majority of company executives was at least 11%.Half of the companies also said that the salary of ordinary employees increased by 3.1% last year, and a third of the companies reported that employee compensation, on the contrary, decreased between 2020 and ...
The past year ended very successfully for the American market: the S&P 500 rose by 26.9%, although initially a more modest increase was expected. So, our optimistic (!) scenario included an increase in the broad market index to only 10%. However, the US stock markets got off to a good start and remained on top with the support of the adoption of infrastructure reform. The economic recovery also turned out to be more active than we expected, and this helped companies to increase revenue and profit more intensively. At the same time, the development of all these trends contributed to the acceleration of inflation, which went far beyond the expectations of the Fed, the market and our forecasts. It was inflation that became the most discussed topic last year and will absolutely remain at the top of the agenda in the first half of 2022.To bring inflation under control, the Fed thought about reducing the balance sheet only at the beginning of this year: even in December 2021, there was no talk about it. The reduction of the balance sheet, combined with a sharper than originally planned increase in rates, can act as a reliable way to curb inflation expectations. These expectations are formed mainly on stock exchanges, which excludes their negative impact on the economy in general and on the labor market in particular. A steady positive trend in the labor market is indicated by data for October, when the number of open vacancies reached a record 11.03 million, 1.5 times exceeding the number of applicants. This ratio was last observed 50 years ago. Together with an increase in logistics efficiency, the restoration of production capacities and the gradual opening of the economy, this will lead to a gradual decrease in inflation. Of course, we have repeatedly talked about the upcoming opening of the economy after the pandemic during the second half of 2021, but this event is delayed due to the appearance of new COVID-19 strains. And yet, the longer the pandemic continues, the closer its end is.After a negative start to the year for most securities in the technology sector and a general correction, investors should consider closing hedging positions that I advised opening at the end of last year. Now is the time to buy a wide range of stocks with a focus on "value" and "quality" companies. The intensive growth of the economy serves as the basis for optimistic expectations regarding revenue and profit. That is why the upcoming reporting season is the strongest driver of the growth of quotations of representatives of the real sector of the economy. Of course, there is also a trend to reduce the cash flows of companies, since there is no effect of a low base and economic growth begins to slow down. However, it is predicted that the S&P 500 companies will increase sales by almost 15%, and their earnings per share will increase by 21.5%. Among the leaders will be the energy, raw materials and industrial sectors, as well as the segment of secondary necessities. The momentum for an upward movement in their quotes will be provided by strong results for the fourth quarter and optimistic forecasts for January-March. Separately, I would like to note the financial sector, which will not be able to demonstrate a record increase in revenue and profit, but industry forecasts for 2022 may become one of the most optimistic, taking into account the plans of the Federal Reserve to actively raise the key ...
The year 2022 on world markets will largely be determined by the tightening of monetary policy in the United States, and the first week of the new year confirmed this. The minutes of the Fed's December meeting published last week showed a significant tightening of the position of the regulator's representatives – Fed members believe that the rate can be raised as early as March, and also see a faster reduction in the balance sheet as appropriate. Representatives of the regulator believe that the current economic conditions are already in many ways conducive to tightening the labor market, some even noted the recovery of the labor market already sufficient for such actions, although the majority still expects further improvement in the labor situation. Against this background, it is worth noting the publication of December labor data in the United States, which came out ambiguous. On the one hand, employment in December increased by only 200 thousand. The Bloomberg consensus forecast assumed an employment growth of 450 thousand, and the actual growth rate of the indicator was the lowest since the beginning of 2021. Nevertheless, in many respects such weak employment growth is explained by seasonal adjustment, and the unemployment rate in December fell more than expected. Thus, the indicator has updated the next lows since the beginning of the pandemic, dropping to 3.90% against the expected 4.10%. The unemployment rate continues to approach a historic low of 3.40%, and labor statistics have further increased fears in the market of an imminent tightening of the PREP in the United States. As a result, on Friday, the yields of ten-year US treasuries at the moment exceeded 1.80% per annum - the maximum since the beginning of the pandemic. Today they have returned to these levels again.This week, the dynamics in the market will continue to be determined by expectations for the actions of regulators - investors will follow the statements of representatives of the Fed and the ECB, as well as the publication of price data in the United States for December. Statistics published last week showed an increase in inflation in the EU to 5.00% YoY. As a result, the topics of price growth in December updated the historical maximum, while analysts expected a slight slowdown in price growth. The situation on the supply side also has high inflation in the United States. The December business activity indices indicated a slight easing of logistical problems, however, the further deterioration of the epidemiological situation again intensified disruptions in logistics chains, which does not lead to a significant slowdown in price growth. The FAO World Food Price index fell in December for the first time since July, but food inflation remains at elevated levels. Against this background, US inflation data is likely to continue to bring the Fed rate hike closer, intensifying the negative in the markets.The main event for the oil market in early 2022 was the OPEC+ meeting. However, as expected, it was decided to stick to the current plan to increase production. Nevertheless, the cartel lowered its forecasts for a surplus in the oil market, which allowed Brent crude futures to exceed the level of $80/bbl. Moreover, against the background of interruptions in the supply of black gold from Kazakhstan and Libya, quotations were close to $83/bbl. However, at the end of the week they declined from these levels, today Brent futures are growing by 0.35% and are trading around $82.05/bbl. The main negative for oil this week may be related to the potential strengthening of the dollar amid expectations of a tightening of the PREP in the United States. However, in the absence of a significant strengthening of the dollar, Brent futures may still exceed the levels of $83/bbl– - the quotes may be supported by another weekly decline in oil ...
The German Statistical Office published the final data on the dynamics of consumer prices in October in accordance with European reporting standards. They indicate an acceleration of inflation to 4.6%. The indicator is calculated in relation to the prices that were fixed a year earlier. In monthly terms, consumer prices showed an increase of 0.5%. For comparison: in September, inflation in annual and monthly terms was 4.1% and 0.3%, respectively. The calculation of indicators according to German standards showed an increase in the inflation rate in Germany to a maximum for the period since 1993. It amounted to 4.5% in annual terms. Compared to September, prices rose by 0.5%. Both indicators correspond to the forecasts of the surveyed analysts. By the end of September, inflation was 4.1% compared to the same month last year. In monthly terms, it showed zero dynamics. The largest contribution to the growth of October inflation was made by energy carriers. They have risen in price by 18.6%. The cost of food increased by 4.4%. Prices for services increased by ...