Inflation threats troubling markets

1 June, 2018

On Thursday the markets failed to develop growth momentum. Investors favoured a cautious tone towards riskier assets as the US imposed import tariffs on Canada, Mexico and the EU. Initial reaction from the markets was subdued, as traders had already priced in such a move. With US inflation close to central bank targets the new tariffs could pose significant economic risks. The threat of a more vigorous increase in interest rates from the Fed becomes more of a reality. In addition to external factors, such as soaring energy prices and new tariffs, there are increased internal price drivers. On Thursday the Bureau of Economic Analysis reported an increase in consumer spending by 0.6% in April.

Unemployment Claims were lower than expected and that is another sign of a tight labour market where companies have to compete for workers. Whether this spike occurred in May will be revealed later today as wages data is released.

Inflation surge in Europe

large euro area economies were marked by a powerful (by 0.4%-0.6%) prices increase, speeding annual inflation growth from 1.2% to 1.9%. Confirmation of this fact helped to pull EUR higher on Thursday, although it has not become such a surprise as it was on Wednesday. Core CPI (excluding food and energy) accelerated from 0.7% YoY to 1.1% YoY. It seems that inflation is returning to Europe much earlier than expected which could quickly lead to a tightening in the ECB’s rhetoric.

Renewed outflow from EM

Developing markets are responding negatively to the increase in global inflation resulting in Investors withdrawing money from emerging markets as the difference in profitability with American assets has continued to decline. TRY, MXN and RUB fell on Thursday, and remain under pressure early on Friday.

The growth in production has seen Oil prices experience downward pressure. In addition to the increased demand for safe assets, pressure for Crude Oil increased after recent weekly data on U.S. inventories. Although inventories declined higher than expected by 3.6 mln. barrels , Crude Oil supply for the week grew from 10.73 mln. barrels per day to 10.77 man bpd. Following the data release Brent fell 2.8% to 76.90 but has since stabilised to trade around $77.40.


Source link  
Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...

Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...

Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...


Trump says Brexit should happen

President Donald Trump promised the U.K. a "phenomenal trade deal" Tuesday, on the second day of his state visit to Britain...

Euro and Gold instead of Dollar

Gold rose on Monday to the highest levels since February, reaching $1327 per ounce. In the first hours of the Tuesday trading session, there...

Markets recover after the drop

The markets decline on investors' fears that trade conflicts will drag on and slow down demand, and this dynamic coincided with breaking through important...


Markets pressured by Huawei problem

Alphabet and some other American IT companies have suspended business with Huawei, which is one of the first examples of major consequences for...

The climate is changing rapidly

British people need to fly less, drive electric cars, eat little meat and turn their home thermostats down to 19 degrees Celsius (66 Fahrenheit) in order to rein...

Chinese stocks saw their worst week

Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai...

  


Share it on:   or