Hey Folks, enjoy your long Holiday weekend here in the US with markets closed on Monday. This past week saw Volatility remain high and fluctuating index prices as Russians continue to cause Mischief with a possible invasion scenario with Ukraine.
Get my takes on the markets in this week’s Market Round-Up;
WEEKLY SOUND BITES:
Equity markets are still around its highest valuation since the dot-com period with the markets getting ahead of themselves with the easy money policies pushed into the economy so over the next decade we can expect to see much slower annual growth. And they suffered their second consecutive week of declines as worries over a Russian invasion of Ukraine and high inflation weighed on sentiment and market volatility. By Friday afternoon, futures markets were pricing in about an 80% probability of only a 25 bps hike in March which is down from a possible 50 bps hike due to a slightly dovish Fed Meeting notes.
Weekly jobless claims rose for the first time in a month, and two regional manufacturing indexes surprised on the downside. Conversely, retail sales rebounded by 3.8% in January, more than expected and the most since last spring. The sales data are not adjusted for inflation, however, and rising prices seemed to be behind much of the increase.
For every professional prognosticator who is sure a recession is inevitable, there’s another one predicting that the Fed can combat inflation without reversing economic growth. The disagreement over the inevitability of a recession reflects varying views about the frequency and quantity of coming interest-rate increases; the Fed’s plans for and ramifications of shrinking its monster balance sheet after $5 trillion in emergency bond purchases; and the true state of an economy turbocharged by fiscal and monetary policy and not yet through the pandemic. A record $30 trillion in public debt—up about 30% since early 2020—means that even rates topping out at 2% translate to an extra $600 billion a year in interest owed and affect future spending. Economists are struggling to model for QT. “I can model what 100 basis points in hikes do to GDP. But we don’t know what $100 billion in QT will do.
Meanwhile, in Europe, ECB President Christine “Queen Bee” Lagarde emphasized that any adjustment to monetary policy would be gradual and guided by key economic data. And in the UK inflation reached a 30-year high in January and the labor market tightened further, contributing to increased expectations for the BOE to announce a third consecutive interest rate increase in March. Consumer prices rose 5.5% from year-ago levels in January—the highest level since March 1992—and up from 5.4% in December.
Buoyed by strong private consumption amid falling coronavirus cases, the Japanese economy grew by an annualized 5.4% quarter on quarter over the final three months of 2021, having contracted by 2.7% in the third quarter of the year. And the Bank of Japan will continue monetary easing to achieve the price stability target of 2%.
Chinese markets rose as supportive comments from government officials and lower-than-expected inflation data increased investors’ risk appetite. China’s producer price index (PPI) and consumer price index (CPI) inflation both came in lower than expected in January.
Enjoy this week’s Round-Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
