Germany: Ifo Index and expectationsToday, the key indicator in the eurozone will be the publication of the German Ifo index, which investors are carefully comparing with yesterday's PMI data. Of particular interest is the component of expectations present in the Ifo and absent in the PMI, as it is able to better reflect the impact of trade conflicts, in particular, between the United States and China.USA: moderately positive signals and political noiseDespite weak regional reports from the Fed, the index of business activity in the US industry unexpectedly rose to 50.7, surpassing expectations of 49.1. At the same time, the services sector weakened to 51.4, but remained above the threshold of stagnation. The composite index decreased from 53.5 to 51.2, which still indicates moderate growth. The weakening of export orders in both sectors was offset by steady domestic demand: new orders increased in industry, while they decreased slightly in the service sector.However, against the background of macroeconomic statistics, the political factor has become more active again. There were reports that it was the ministers of finance and trade, Bessent and Latnik, who dissuaded the president from firing Fed Chairman Powell. Bessent also commented on the situation regarding trade negotiations with China, saying that a full-fledged agreement may take 2-3 years, and the resumption of dialogue is impossible without reducing tariffs, which now reach 145% on Chinese goods and 125% on American goods. The possibility of tariff cuts of up to 50% is being discussed on the sidelines, but the White House has not yet confirmed these rumors. This news caused cautious optimism and increased the probability of a deal with China to 38% from 34% previously.An additional boost to the market was given by information from the Financial Times, according to which the US administration may consider the possibility of partially exempting automakers from import duties after appropriate lobbying efforts by the industry.Eurozone: weakness in the service sectorThe combined eurozone business activity index fell to 50.1 in April, while the drop in the services sector to 49.7 was unexpected. On the contrary, the manufacturing PMI showed positive dynamics, exceeding forecasts and reaching 48.7. Despite this, pressure on the ECB towards additional easing remains, especially since the price components also indicate a weakening of the inflationary pressure. The employment rate in the service sector, however, remains positive at 50.8, which mitigates the negative effect of the decline in the overall index.The update of the ECB wage index also indicates a slowdown in wage growth in 2025, which strengthens the case for lower rates. According to current expectations, the deposit rate may be lowered to 1.5% by September 2025.UK: alarming signs of stagflationThe PMI figures for April in the UK turned out to be worse than expected across the board. The composite index fell to 48.2, signaling a reduction in business activity. The indices for services and production were 48.9 and 44.0, respectively. At the same time, there is an increase in both incoming and outgoing prices, and employment continues to decline. This combination indicates the risk of a stagflationary scenario, which significantly complicates the task of the Bank of England in terms of monetary policy.Energy market: uncertainty over OPEC+ quotasOil prices fell by 2% after reports that several OPEC+ countries called for an additional increase in production in June, similar to the decision taken in May. Kazakhstan, in turn, stated that it was not ready to compensate for the excess production of the previous period with cuts. Eight OPEC+ countries will meet on May 5 to discuss the future quota. Due to continued pressure on prices in the second quarter, the average Brent price is expected to be around $70 per barrel, with a subsequent recovery to $85 in the fourth quarter.Stock markets: rising amid political optimismBuyers prevailed on stock markets, despite contradictory macro data. Cyclical sectors led the way, both in the USA and in Europe. The market continues to live under the influence of paradoxes: rising bond yields, a strengthening dollar, and a simultaneous rally in risky assets. The profitable reports of the companies also added to the positive. Indices in the USA ended the day with growth: Dow +1,1%, S&P 500 +1,7%, Nasdaq +2,5%, Russell 2000 +1,5%. However, Asia has been showing a decline since this morning, and futures for the United States and Europe also point to a correction amid cooling political optimism.Bonds and the foreign exchange market: caution returnsWhile Finance Minister Bessant acknowledged the excesses of the current tariffs on Chinese goods, he emphasized the strategic task of redefining U.S. global economic relations. His speech cooled the euphoria of the markets: the yield on 10-year US Treasury bonds rebounded from daily lows and reached 4.39%, indicating an increase in expectations for inflation and interest ...
USA: awaiting reports on the labor market and consumer sentimentTwo important macroeconomic reports will be released in the United States today — the March JOLTs on hiring dynamics and the April consumer confidence index from the Conference Board. Job vacancy data is a key indicator of the state of labor demand for the Fed. Despite the uncertainty caused by the tariff policy, stable data on daily job advertisements suggest that demand remains at an acceptable level.The Eurozone: Spanish inflation and business activityOn European platforms, attention will be focused on the publication of inflation data in Spain for April. This release precedes the general report on inflation in the eurozone, which will be released on Friday. The HICP index is expected to slow growth from 2.2% to 2.1% in annual terms.Of additional interest are data on lending and business sentiment in the eurozone for April, which will be able to reflect the first effects of the new US tariffs.China: expectation of a decline in manufacturing activityIn Asia, the PMI indices for April from NBS and private Caixin will be published. According to expectations, both indicators will show a decline, confirming the negative impact of the ongoing trade war. The previously published Emerging Industries PMI dropped sharply from 59.6 to 49.4 points.Sweden: macroeconomic releases and growth prospectsSwedish statistics today are rich in publications. At 08:00 CET, reports on retail sales and consumer lending for March are expected. The GDP indicator for the first quarter will attract special attention, however, due to its volatility, analysts prefer the NIER economic sentiment index, which will be released at 09:00 CET. Its further decline may signal a slowdown in the Swedish economy.Norway: retail sales remain questionableRetail sales statistics for March will be published in Norway. Despite the global instability, it is unlikely to be reflected in these data. Sales growth is forecast to slow to 0.1% month-on-month, although the effect of postponing holidays makes it difficult to assess the real state of consumer activity.Economic and market news: key eventsCanadian Elections: liberal victoryIn the last parliamentary elections in Canada, the Liberal Party under the leadership of Mark Carney retained power. Although the results had not yet provided them with a full majority in parliament at the time of publication, the victory marks the restoration of the party's position after the resignation of Justin Trudeau. Carney relied on his reputation, formed during the crisis of 2008 and the Brexit process.Macroeconomic data from Denmark, Sweden and NorwayIn Denmark, retail sales in March unexpectedly decreased by 0.1% compared to February, mainly due to lower food costs. However, clothing sales increased by 2.7%.In Sweden, the producer price index decreased for the second month in a row (-3.0% mom, -0.3% YoY), which reduces inflation risks and supports the Riksbank's position.In Norway, the unemployment rate rose to 4.4% in March, but the adjusted data remained unchanged at 4.1%. More recent unemployment statistics will be published on Friday.Geopolitics: the Truce in UkraineRussian President Vladimir Putin announced a three-day truce from May 8-10 in honor of the anniversary of the end of World War II, inviting world leaders to events. Ukraine has criticized, insisting on the need for an immediate and full-fledged ceasefire. The White House supported the idea of a truce, but stressed that the goal should be a long-term peace initiative.Stock markets: stabilization and local successesThe trading session in the American markets passed without significant changes, while the European indices showed growth: the Stoxx 600 added 0.5%. Shares of companies in defensive sectors such as real estate, utilities and healthcare rose against the background of lower bond yields. The VIX volatility index has stabilized around 25 points, which may indicate prolonged uncertainty due to tariff policy.Debt and currency markets: declining yields in the United StatesAt the start of the week, US Treasury bonds continued to rise in price: the yield on 2-year securities decreased by 6 basis points, 10-year — by 3 bps, and 30-year— by 2 bps. European yields, on the contrary, rose slightly. The EUR/USD pair remained stable in the range of 1.13–1.14. The victory of the liberals in Canada led to a moderate strengthening of the Canadian dollar, and a further decline in the USD/CAD pair is expected to reach 1.37. The Norwegian krone also showed good results at the end of yesterday's ...
The beginning of the week promises to be relatively calm on the macroeconomic front. In Denmark, the retail trade index for March will be published today at 08:00 Central European time. According to its own expense monitor, real retail sales decreased by 2.5% year-on-year. However, the decrease is due to the calendar effect: Easter last year fell in March, and this year in April. Seasonally adjusted, real sales increased by 1.8% compared to February, and official statistics are expected to reflect this positive trend.In Sweden, the producer price index for March will be published at the same time. These data, as well as the results of the NIER price Expectations survey published earlier this week, will be important for shaping inflation expectations and, consequently, for further actions by the Riksbank regarding changes in interest rates.Main events of the weekDuring the week, investors' attention will be focused on a variety of key publications. On Wednesday, PMI data from China and a preliminary estimate of US GDP for the first quarter are expected. On Thursday, attention will turn to the Bank of Japan's monetary policy meeting. On Friday, preliminary data on inflation in the eurozone and the US employment report for April will be released.Friday and weekend eventsIn the United States, the University of Michigan consumer sentiment index for April was revised upward to 52.2 points from an initial 50.8. Despite the revision, the index continues to decline for the fourth month in a row and is at its lowest level since July 2022. Uncertainty in trade policy and fears of rising inflation remain the reason for the deterioration in sentiment. Inflation expectations for the year ahead jumped to 6.5%, due to recent tariff initiatives, although the preliminary estimate was even higher — 6.7%.In Japan, Tokyo inflation (excluding fresh produce) accelerated to 3.4% in April, exceeding forecasts. This confirms the existence of stable inflationary pressures. The head of the Bank of Japan, Ueda, confirmed that further rate increases are possible if inflation approaches the target level of 2%. However, he noted that a trade war could weaken inflationary trends. Following this, we expect one of the two planned rate increases to be postponed to the fall and another to the first quarter of 2026.In China, industrial profits increased by 0.8% year-on-year in the first three months of 2025, which is a recovery from the recession at the beginning of the year. At the same time, private sector profits decreased by only 0.3%, which is significantly better than the previous drop of 9%.The US-China Trade War: conflicting signalsDespite President Trump's statements about the ongoing negotiations with Chinese President Xi Jinping, Beijing has denied the fact of such negotiations. The US Treasury Secretary announced cooperation with Chinese representatives at the IMF meetings, but without discussing tariff issues. The Minister of Agriculture, in turn, noted the daily contacts on the topic of tariffs.Geopolitics: the meeting between Trump and ZelenskyIn Rome, as part of the funeral of Pope Francis, the first meeting between Donald Trump and Vladimir Zelensky took place since February. The negotiations were described as "very productive." Trump condemned Russia's recent attacks on civilian facilities in Ukraine and stressed the need to find alternative methods of pressure, including secondary sanctions. At the same time, US Secretary of State Marco Rubio announced the possible curtailment of peace initiatives if Russia and Ukraine do not show progress in negotiations.Greenland and Denmark strengthen their allianceAmid renewed U.S. interest in acquiring Greenland, autonomy's Prime Minister Jens-Frederik Nielsen visited Copenhagen. The meeting with Danish Prime Minister Mette Frederiksen ended with a joint statement of unity: the fate of the island will be decided solely by the Greenlanders.Equity markets: recovery continuesThe past week has brought significant growth in the stock markets: the S&P 500 index has gained 5%, and the European and Scandinavian indexes — about 3%. Cyclical securities grew especially strongly, outperforming defensive assets by more than 5%. On Friday, the growth continued: the S&P 500 gained 0.7%, the Stoxx 600 - 0.4%. Asian markets are showing neutral dynamics this morning, and futures on US indices are slightly declining.Debt and foreign exchange markets: moderate movementsLast week ended with a decline in US government bond yields: yields on 2-year securities fell by 5 basis points, while 10- and 30-year yields fell by 8 points. The yield curve has straightened somewhat. In Europe, yields, on the contrary, rose slightly, despite the soft comments from ECB representatives. In the foreign exchange market, the EUR/USD pair consolidated in the range of 1.13–1.14. The franc and the yen weakened slightly amid an improvement in global risk appetite. This week, the focus will be on data on inflation, GDP and the labor market in the United States and the eurozone, as well as the meeting of the Bank of ...
The week ends with a fairly modest volume of macroeconomic statistics, and investors' main attention is focused on the revised University of Michigan consumer sentiment data for April. The preliminary estimate has already alarmed the markets due to a new surge in inflation expectations, which increases uncertainty about the trajectory of interest rates in the United States.Inflationary signals from JapanThe published inflation data in Tokyo for April exceeded expectations: the overall indicator accelerated to 3.5% in annual terms (the previous value was 2.9%), and core inflation rose to 3.4% (against the forecast of 3.2%). The main reason was the rise in prices for a wide range of goods and services. The beginning of a new fiscal year in Japan is traditionally accompanied by a review of companies' pricing policies, and this year rising costs have become the main reason for the increase in consumer prices. Taking into account the expected acceleration of wages, the Bank of Japan is likely to continue its course towards a gradual normalization of monetary policy, unless trade restrictions from the United States turn out to be critical.US data: short-term surge in ordersIn the United States, data on durable goods orders for March turned out to be significantly higher than expected, with an increase of 9.2% compared with a forecast of 2.0%. However, such a strong result is largely due to temporary factors, in particular, a sharp increase in aircraft orders (primarily Boeing). Excluding the aviation sector, the growth in orders was minimal, which caused a weak market reaction.Comments from the Fed representativesThe speeches of representatives of the Federal Reserve System demonstrated a divergence of opinion. The head of the Federal Reserve Bank of Cleveland spoke out with harsh rhetoric, insisting on a wait-and-see attitude regarding the impact of duties on the economy. At the same time, Christopher Waller, a member of the Fed's Board of Governors, took a softer stance, not ruling out an increase in unemployment. Neel Kashkari, who heads the Federal Reserve Bank of Minneapolis, said that the US trade policy causes him concern about possible mass layoffs in the future. On Saturday, the so-called period of silence begins before the May Fed meeting. The probability of a rate change is extremely low, and the baseline scenario assumes a decrease in June with subsequent steps of 25 bps each quarter to the level of 3.00–3.25% by mid-2026.Trade tensions: China is not backing downChina made a harsh statement yesterday, demanding that the United States completely abolish unilateral tariffs as a condition for starting negotiations. Despite Washington's statements about its desire to reduce tensions, negotiations are not underway yet. Moreover, the Chinese authorities have denied any rumors about current contacts.Companies are also responding to trade instability. According to the Financial Times, Apple plans to move iPhone production for the American market from China to India as early as next year.Germany: positive surprise from the Ifo indexThe Ifo business climate index for April in Germany surprised with growth. The indicator of the current situation rose to 86.4 against the expected decline, and the component of expectations decreased only slightly to 87.4. The construction sector and services made the largest contribution to maintaining positions, while signs of pressure were recorded in the manufacturing sector, including against the background of trade barriers. However, there has not yet been a large-scale negative similar to the PMI data.Stock markets: the positive remainsU.S. stock indexes continued to rise, with stocks of cyclical and technology companies particularly strong. The Nasdaq index gained 2.7%, the S&P 500 — 2.0%, and the Dow - 1.2%. Market participants continue to ignore the current economic data, focusing on the prospects for de-escalation of the trade conflict. Signals from the United States yesterday also indicated a softening of the position.In Asia, trading opened in the "green zone", which was facilitated by rumors about a possible cancellation by China of some tariffs on American goods. Stock index futures in the United States and Europe are also showing growth on the back of positive corporate reports.Debt and foreign exchange market: fluctuations without a clear trendDuring yesterday's session, there was an increase in bond prices and a decrease in yields in both the United States and the eurozone. The US dollar weakened slightly against the euro, but managed to regain its lost ground in the early hours of Friday morning. In conditions of a shortage of important macro statistics, market participants will monitor geopolitical statements and signals from ...
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 ...