InvestMacro

By JustMarkets

At Friday’s stock market close, the Dow Jones Index (US30) was up by 0.15% (+2.90% for the week), while the S&P 500 Index (US500) closed at its opening price (+2.74% for the week). The NASDAQ Technology Index (US100) closed positive by 0.35% (+3.30% for the week). The Dow Jones Industrials Index (US30) set a new record, and the Nasdaq 100 (US100) climbed to a 2-year high.

Hawkish comments from the Fed on Friday lent support to the dollar. New York Fed President Williams said the question now is whether the bank has sufficiently constrained the economy. That said, talk of a rate cut in March is now premature. Also, Atlanta Fed President Bostic said that policymakers still need a few more months to see enough data to gain confidence that inflation will continue to decline, and he expects the Fed to start cutting interest rates in the third quarter of 2024 if inflation declines as expected.

The US economic reports on Friday dampened hopes that the Fed could provide a soft landing for the economy. Empire’s index of overall business conditions in the US manufacturing sector for December fell by 23.6 to a 4-month low of 14.5, weaker than expected. US manufacturing output for November rose by 0.3% m/m, weaker than expectations of 0.5% m/m. The S&P US Manufacturing PMI for December unexpectedly declined by 1.2 to 48.2, weaker than expected to 49.5 and the weakest reading in 4 months.

The US equity funds stepped up their buying of stocks. Bank of America (BoA) reported that according to EPFR Global, US equity funds received $25.9 billion in the week ended December 13, marking the ninth week of inflows and the longest streak in two years. This indicates that investors continue to invest in the stock market in anticipation of the holiday rally (Santa Claus Rally). Market volatility on Friday was higher than usual due to the expiration of monthly and quarterly options and futures contracts, which is known as the “triple witching.” In addition, many indices rebalanced on Friday. According to Tier1Alpha, about $3.1 trillion in contingent open interest is scheduled to expire or roll over into the new year.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) decreased by 0.01% (-0.05% for the week), France’s CAC 40 (FR 40) added 0.28% (+0.83% for the week), Spain’s IBEX 35 (ES35) lost 0.75% (-1.18% for the week), and the UK’s FTSE 100 (UK100) closed negative by 0.95% (+0.29% for the week).

The S&P Eurozone Manufacturing PMI for the decade was unchanged at 44.2, weaker than expectations of a rise to 44.6. The S&P Manufacturing PMI for December unexpectedly declined, falling by 0.6 to 47.0, weaker than expectations of a rise to 48.0. The Eurozone economy continues to struggle and could enter a technical recession in the coming weeks. According to the HCOB, the Eurozone economy is not showing any clear signs of recovery. On the contrary, it has been contracting for six consecutive months. The probability that the Eurozone has been in recession since the third quarter remains very high. If the Eurozone falls into recession and inflation continues to fall, the ECB may have to change course on interest rates and start preparing the market for a series of cuts next year. Swaps tied to ECB meeting dates are predicting a 25 bps probability of an 8% rate cut for the ECB’s January 25 meeting and 57% for the March 7 meeting.

UK inflation data will be released tomorrow. If inflation comes in below forecast, the Bank of England (BoE) will be pressured to consider an earlier rate cut, and this will put pressure on the British Pound in the coming weeks.

Silver prices came under pressure on Friday on concerns over demand for industrial metals after US manufacturing output data for November, S&P’s US manufacturing PMI for December, and Jibun Bank’s Japanese manufacturing PMI for December were weaker than expected.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) gained 0.94% for the week, China’s FTSE China A50 (CHA50) declined 2.01% over five trading days, Hong Kong’s Hang Seng (HK50) jumped by 3.98% for the week, and Australia’s ASX 200 (AU200) added 3.44% for the week.

The Bank of Japan’s (BoJ) monetary policy meeting will take place as early as tomorrow. The Bank of Japan has held the benchmark rate at 0.1% for a decade now, hoping to stimulate investment and borrowing to promote sustainable growth. One goal is to bring inflation to the 2% target. But while inflation is rising, wages have not kept pace, and central bank governor Kazuo Ueda remains cautious about taking major steps at a time of deep uncertainty about the global economic outlook.

S&P 500 (US500) 4,719.19 −0.36 (−0.01%))

Dow Jones (US30) 37,305.16 +56.81 (+0.15%)

DAX (DE40)  16,751.44 −0.79 (−0.01%)

FTSE 100 (UK100) 7,576.36 −72.62 (−0.95%)

USD Index  102.59 +0.64 (+0.63%)

• – Germany Ifo Business Climate (m/m) at 11:00 (GMT+2);
• – New Zealand Trade Balance (q/q) at 23:45 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

As of Monday’s stock market close, the Dow Jones Index (US30) was up by 0.43%, while the S&P 500 Index (US500) added 0.39%. The NASDAQ Technology Index (US100) closed positive by 0.20% yesterday. Stocks found support on Monday on expectations that US consumer prices will continue to decline. Today, the CPI report for November will be released. US CPI is expected to decline to 3.1% y/y from 3.2% y/y in October, while CPI excluding food and energy is expected to remain unchanged at 4.0% y/y.

This week, markets will also keep a close eye on the results of the central bank meetings of the Fed, ECB, SNB, and Bank of England to see if policymakers support the suspension of the interest rate hike campaign and when they might start to shift to a softer policy.

According to Bloomberg Intelligence, 2024 will be a year of strong fundamental growth for stocks of companies that make chips for generative artificial intelligence.

According to the latest polls, Mexico’s central bank (Banxico) is likely to keep its benchmark interest rate unchanged this Friday for the sixth consecutive time at 11.25%, with discussions of a rate cut not starting until next year. Minutes from the bank’s last monetary policy meeting showed the idea of discussing a key interest rate cut in the first quarter of 2024.

Equity markets in Europe traded on Monday without a single dynamic. German DAX (DE40) rose by 0.21%, French CAC 40 (FR40) gained 0.33% yesterday, Spanish IBEX 35 (ES35) declined by 0.25%, and British FTSE 100 (UK100) closed negative by 0.13%. Goldman Sachs raised its 12-month forecast for the STOXX 600 index to 500, implying a nearly 6% gain through the end of 2024 on expectations of lower interest rates. The broker previously expected the index to end 2024 at 480 points. Meanwhile, GS downgraded its recommendation on European banks to “neutral” as it expects the European Central Bank to cut interest rates next year.

Swap prices show that the chances of an ECB rate cut in Q1 2024 have decreased. In swaps tied to ECB meeting dates, the probability that the ECB will cut the benchmark rate by 25 bps at its March 7 meeting is 58%, down from 67% recorded last Friday.

Crude oil prices recovered from early losses on Monday and posted a slight gain after the American Automobile Association (AAA) predicted a record number of air travelers during the Christmas week, which will have a positive impact on fuel demand. AAA predicted that a record 7.5 million people will use air transportation services between December 23 and January 2.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) gained 1.5%, China’s FTSE China A50 (CHA50) added 0.13% on Monday, Hong Kong’s Hang Seng (HK50) fell by 0.81% on the day, and Australia’s ASX 200 (AU200) was positive 0.06%.

Even late last week, the market was dominated by rumors that the Bank of Japan was planning an exit from negative interest rates. But yesterday, BoJ officials said that they see no need to rush to abandon the negative interest rate policy as there is insufficient evidence of wage growth to support sustainable inflation. Such an approach could undermine investor confidence in the yen and the JP225, so the Bank of Japan should be more consistent.

Japan’s BSI Large Manufacturing Business Conditions Index rose from 5.4 to 5.7 in Q3, the highest reading in 2 years.

Australia’s updated mid-year budget will include about A$10 billion ($6.56 billion) in savings as the government seeks to cut spending in an attempt to contain high inflation. Australian households are under financial pressure from high inflation and rising interest rates, but the vast majority of borrowers can service their loans. That means the RBA has room to keep rates high for longer.

S&P 500 (US500) 4,622.44 +18.07 (+0.39%)

Dow Jones (US30) 36,404.93 +157.06 (+0.43%)

DAX (DE40)  16,794.43 +35.21 (+0.21%)

FTSE 100 (UK100) 7,544.89 −9.58 (−0.13%)

USD Index  103.97 -0.01 (-0.01%)

• – Australia RBA Gov Bullock Speaks at 00:20 (GMT+2);
• – Japan Producer Price Index (m/m) at 01:50 (GMT+2);
• – Australia NAB Business Confidence (m/m) at 02:30 (GMT+2);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+2);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+2);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+2);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – US Consumer Price Index (m/m) at 15:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By ForexTime 

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

At the close of the stock market on Friday, the Dow Jones Index (US30) was up by 0.82% (+0.44% for the week), while the S&P 500 Index (US500) added 0.41% (+0.88% for the week). The NASDAQ Technology Index (US100) closed up by 0.45% (+1.66% for the week) on Friday. Stocks initially declined on Friday, and bond yields jumped after the monthly labor market report showed a larger-than-expected increase in non-farm payrolls for November and an unexpected drop in the unemployment rate to a 4-month low, dampening speculation that the Fed will cut interest rates as early as the first quarter of next year. However, stocks reversed and headed higher as inflation expectations eased, and a larger-than-expected increase in the University of Michigan’s US consumer sentiment index for December improved prospects for a soft landing.

US nonfarm payroll employment for November rose by 199,000, exceeding expectations of 185,000. The unemployment rate fell by 0.2 to a 4-month low of 3.7% in November, indicating a stronger labor market. Average hourly earnings in the US for November were up by 4.0% y/y, unchanged from October and in line with expectations. The University of Michigan Consumer Sentiment Index for December rose by 8.1 to a 4-month high of 69.4, exceeding expectations of 62.0. Inflation expectations for 5-10-year inflation also declined in December to 2.8% from 3.2% in November, better than expectations of 3.1%.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.78% (+2.25% for the week), France’s CAC 40 (FR40) gained 1.32% (+2.66% for the week), Spain’s IBEX 35 (ES35) jumped by 0.76% (+0.86% for the week), and the UK’s FTSE 100 (UK100) closed positive by 0.54% (+0.33% for the week).

Ahead of the December European Central Bank (ECB) meeting, there is growing evidence that the Governing Council is divided on what to present to the markets. Typically hawkish Isabel Schnabel made strong dovish hints by ruling out a rate hike this week, and markets are now pricing in a 135 bps rate cut over the next 12 months. A reassessment of inflation expectations has played a leading role in lowering rates and raising expectations for the first rate cut late in the first quarter of next year.

No rate changes are expected at Thursday’s Bank of England (BoE) meeting, but the Bank of England will counter the rising tide of rate cut expectations. Bank Governor Bailey recently indicated his stance on more rate hikes in an attempt to curb speculation of an imminent rate cut. Markets are predicting three rate cuts in 2024 from the BoE, but the first rate cut won’t come until June 2024 at the earliest, while the ECB and the US Fed could cut rates as early as March-April 2024.

Oil rose on Friday after better-than-expected US economic reports on November payrolls and December consumer sentiment eased recession fears and bolstered prospects for a soft landing, a positive for energy demand and oil prices. In addition, the US plans to replenish the strategic oil reserve by supporting oil. The US Department of Energy released a request to purchase up to 3 million barrels of oil with delivery in March to replenish the Strategic Petroleum Reserve. This was in addition to a previous tender to buy the same volume in February. The Energy Ministry said it will hold monthly tenders to buy oil to replenish the reserve until at least May next year.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) was down by 3.03% for the week, China’s FTSE China A50 (CHA50) lost 3.06% for the five trading days, Hong Kong’s Hang Seng (HK50) fell by 3.46% for the week, and Australia’s ASX 200 (AU200) was positive 1.72% for the week.

Japan’s Q3 GDP data was unexpectedly revised downward to 2.9% y/y from 2.1% y/y, weaker than expectations of 2.0% and the sharpest rate of contraction since the pandemic. The Q3 GDP deflator was revised upward to a record 5.3% y/y from 5.1% y/y.

China’s consumer price index fell by 0.5% in November from the previous month. The index was weaker than expectations of a 0.1% drop and also worsened from October’s 0.1% decline. On an annualized basis, CPI inflation fell by 0.5%, the lowest reading in 3 years. The data contradicts a recent statement from the head of the People’s Bank of China (PBoC), who said inflation would go up. The decline in inflation came despite continued liquidity injections from the government and signaled that Beijing needs to do more to support economic activity.

S&P 500 (US500) 4,604.37 +18.78 (+0.41%)

Dow Jones (US30) 36,247.87 +130.49 (+0.36%)

DAX (DE40) 16,759.22 +130.23 (+0.78%)

FTSE 100 (UK100) 7,554.47 +40.75 (+0.54%)

USD Index 103.98 +0.44 (+0.43%)

• – Norway Inflation Rate (m/m) at 09:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was up by 0.17%, while the S&P 500 Index (US500) added 0.80%. The NASDAQ Technology Index (US100) closed positive by 1.37% on Thursday.

A positive for stocks yesterday was Alphabet (GOOG) shares rising more than 5% after Google released Gemini, “the largest and most capable artificial intelligence model” the company has ever developed. Additionally, Advanced Micro Devices (AMD) shares are up more than 5% after the company unveiled its new accelerator chip MI300, saying the processor will be able to run artificial intelligence programs faster than competing products.

US weekly initial jobless claims rose by 1k to 220k, matching expectations. Today, the US will release its monthly nonfarm labor market report. The unemployment rate is expected to be 3.9%, and Nonfarm Payrolls are expected to increase by 180k in November compared to 150k in October. A strong (better than expected) report could undermine bets that the Fed will start easing its restrictive monetary policy sooner than expected, which would serve as a headwind for a rally in equities and bring back confidence in the dollar, at least temporarily. On the other hand, a weak Nonfarm report (worse than expected) will increase investor fears that the labor market and economy are cooling. If the data comes out in line with expectations, it is unlikely to do much to shake market expectations for several Fed rate cuts next year, which will only add to market volatility.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) decreased by 0.16%, France’s CAC 40 (FR40) fell by 0.10%, Spain’s IBEX 35 (ES35) lost 1.09%, and the UK’s FTSE 100 (UK100) closed negative 0.02%. Recent economic data from Germany has heightened fears that the industrial sector will continue to have a negative impact on the Eurozone’s largest economy. Germany’s industrial sector is struggling: industrial production in Germany unexpectedly fell in October, a day after industrial orders in the country’s largest Eurozone economy also unexpectedly fell in the same month.

On Thursday, the euro fell to its lowest level against the Swiss franc in nearly nine years as markets bet on an imminent interest rate cut by the European Central Bank (ECB). Currently, the difference between short rates in the Eurozone and Switzerland is around 225 basis points, but markets expect this to narrow to 150 in the next 12 months. This makes the euro less attractive than the Swiss franc. Analysts at Goldman Sachs believe the ECB will cut interest rates by 25 basis points (bps) at each meeting starting next April. Economists at the brokerage forecast that the ECB’s deposit rate will reach 2.25% by early 2025. BNP Paribas also expects the ECB to make its first interest rate cut in April 2024 and to “gradually reduce rates” over the year, citing weak economic activity and weakening inflation. BNP chief economist Luigi Speranza believes the ECB’s prime rate will be 3.25% by the end of 2024, down from 4% currently.

Crude oil and gasoline prices on Thursday continued Wednesday’s sharp decline. Crude oil fell to a five-month low. Concerns about a global crude oil supply glut continue to weigh on oil prices. In addition, doubts about whether the OPEC+ agreement to cut crude oil production will be honored are weighing on prices.

High inventories caused by carryover balances from the mild winter of 2022/23 and weak heating demand have depressed natural gas prices. As of December 3, natural gas storage in Europe was 94% full, above the 5-year seasonal average of 84% for this time of year.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) fell by 1.76%, China’s FTSE China A50 (CHA50) was down by 0.16%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.71%, and Australia’s ASX 200 (AU200) ended Thursday negative 0.07%.

The Nikkei 225 (JP225) fell sharply on Thursday, while the yen rose sharply to hit a 4-month high against the dollar. The yen saw a massive short-covering in the yen on Thursday as comments by Bank of Japan (BoJ) Governor Ueda in the Japanese parliament reinforced speculation that the BoJ would soon exit ultra-easy monetary policy. On Wednesday, Deputy Governor Ryozo Himino discussed the potential impact of an exit from ultra-loose monetary policy on the economy. Their joint comments “fueled the fire.” Japanese five-year bond yields witnessed the most aggressive sell-off in a decade. However, Ueda remained of the view that policy would remain loose in the near term, citing the need to stimulate economic growth. This view was bolstered by Japan’s revised third-quarter gross domestic product data, which showed a bigger decline in economic growth than initially expected.

India’s central bank (RBI) left its key lending rate unchanged at 6.5% on Friday as growth in the world’s fastest-growing economy remains robust and the inflation outlook uncertain. The central bank also raised its economic growth forecast to 7% from 6.5% after stronger-than-expected growth in July-September. RBI forecasts consumer inflation at 5.4% in 2023-24.

S&P 500 (US500) 4,585.59 +36.25 (+0.80%)

Dow Jones (US30) 36,117.38 +62.95 (+0.17%)

DAX (DE40)  16,628.99 −27.45 (−0.16%)

FTSE 100 (UK100) 7,513.72 −1.66 (−0.022%)

USD Index  103.64 −0.51 (−0.49%)

• – Japan GDP (q/q) at 01:50 (GMT+2);
• – German Final Consumer Price Index (m/m) at 09:00 (GMT+2);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• – US Unemployment Rate (m/m) at 15:30 (GMT+2);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was down by 0.22%, while the S&P 500 Index (US500) decreased by 0.06%. The NASDAQ Technology Index (US100) closed positive 0.31% on Tuesday. A decline in bond yields on Tuesday supported technology stocks and the Nasdaq 100. Bond yields fell after the October JOLTS job openings report fell more than expected to a 2-year low, a sign that the labor market is cooling and dovish for Fed policy.

Economic news from the US on Tuesday was mixed. On the bullish side, the ISM Services Business Activity Index for November rose by 0.9 to 52.7, beating expectations of 52.3. In contrast, the October JOLTS Job Openings Index fell by 617,000 to a 2-year low of 8.733 million, indicating a weaker labor market than expectations of 9.300 million.

Procter & Gamble (PG) fell more than 3% and topped the Dow Jones Industrials’ list of losers after it said it expects $2.0 billion to $2.5 billion in restructuring costs for its operations in some corporate markets due to “challenging macroeconomic and financial conditions.” Nvidia (NVDA) stock price rose more than 2% and led the Nasdaq 100 higher after the company said it plans to partner with Japanese research organizations, companies, and startups to build artificial intelligence factories in Japan.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.78%, France’s CAC 40 (FR40) gained 0.74% on Tuesday, Spain’s IBEX 35 (ES35) jumped by 0.59%, and the UK’s FTSE 100 (UK100) closed negative 0.31%. Economic news for European indices contributed to the gains. The S&P Eurozone Composite PMI for November was revised upward by 0.5 to 47.6 from the previously reported 47.1. The Eurozone Producer Price Index for October rose by 0.2% m/m to 9.4% y/y, matching expectations of 0.2% m/m and 9.5% y/y.

The ECB’s monthly inflation expectations survey showed that expectations for 1-year inflation in October were unchanged from September at 4.0%, above expectations of 3.8%. 3-year inflation expectations were 2.5%, unchanged from September and in line with expectations. ECB Executive Board spokesperson Schnabel said yesterday that another ECB interest rate hike is rather unlikely.

The build-up in US crude oil exports is putting pressure on oil prices. In addition, the rise in the dollar index to a one-week high on Tuesday was a negative factor for oil. In addition, Saudi Arabia’s actions to cut official oil selling prices for Asian buyers for January delivery is a negative factor for oil. Russian Deputy Prime Minister Novak said OPEC+ may take additional measures if last week’s production cuts fail to balance the oil market.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.37%, China’s FTSE China A50 (CHA50) lost 2.55% yesterday, Hong Kong’s Hang Seng (HK50) fell by 1.91% on the day, and Australia’s ASX 200 (AU200) was negative 0.89% on Tuesday.

China’s Shanghai Composite index fell to a 5-week low as Moody’s Investors Service cut its outlook on China’s sovereign debt from stable to negative, weighing on global growth prospects. According to the median forecast of 28 economists surveyed, China’s exports are expected to decline 1.1% in November from a year earlier, following a 6.4% drop in October and continuing a downward trend for the fourth consecutive month.

Australia’s real gross domestic product (GDP) rose by 0.2% in the July-September quarter from the previous quarter, marking the eighth consecutive quarter of growth, albeit the slowest in a year. Australia’s economy barely grew in the third quarter as exports contracted and households suffering from soaring mortgage payments were reluctant to spend, suggesting higher rates are curbing demand.

Ryozo Himino, deputy governor of the Bank of Japan (BoJ), said the central bank should determine the timing and appropriate structure of the exit from ultra-loose monetary policy while closely monitoring developments in wages and prices. He also noted that Japan is making progress in exiting the protracted period when wage and price growth remained stagnant.

S&P 500 (US500) 4,567.18 −2.60 (−0.06%)

Dow Jones (US30) 36,124.56 −79.88 (−0.22%)

DAX (DE40)  16,533.11 +128.35 (+0.78%)

FTSE 100 (UK100) 7,489.84 −23.12 (−0.31%)

USD Index  103.96 +0.25 (+0.24%)

• – Australia GDP (q/q) at 02:30 (GMT+2);
• – UK Construction PMI (m/m) at 11:30 (GMT+2);
• – UK FPC Meeting Minutes at 12:30 (GMT+2);
• – UK BoE Financial Stability Report at 12:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 13:00 (GMT+2);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
• – US Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada BoC Interest Rate Decision at 17:00 (GMT+2);
• – Canada BoC Rate Statement at 17:00 (GMT+2);
• – Canada Ivey PMI (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior 

The European Central Bank is likely to cut interest rates next year, which could have far-reaching consequences for investors worldwide, predicts the CEO of one of the world’s largest independent financial advisory asset management and fintech organizations.

Nigel Green of deVere Group’s comments come as ECB Board member, Isabel Schnabel, who has previously been one of the most hawkish of the Board, told Reuters on Tuesday that given a “remarkable” fall in inflation, the central bank can now take rate hikes off the table.

Euro zone inflation fell to 2.4% last month, down from above 10% a year earlier.

He comments: “When the hawks turn dovish, and as inflation falls to within touching distance, it is reasonable to assume that the ECB will start to cut rates.

“We now expect this to begin in the first quarter of 2024.”

If the ECB decides to cut interest rates, European investors are likely to experience both challenges and opportunities.

“On the one hand, lower interest rates can boost economic growth, leading to increased corporate profits and potentially higher stock prices.

“However, on the downside, savers and bond investors could face diminished returns. The repercussions of ECB interest rate cuts extend beyond Europe, influencing global bond markets.

“As the ECB lowers rates, it can be expected to trigger a broader trend of falling yields in bond markets worldwide.

“Fixed-income investors across the globe, seeking higher returns, may shift their attention to riskier assets.”

Another channel through which the ECB’s policy decisions affect global investors is currency markets. A rate cut by the ECB is likely to lead to a depreciation of the euro against other major currencies.

This can impact international investors holding euro-denominated assets, either positively or negatively, depending on their exposure and hedging strategies. For instance, European exporters may benefit from a weaker euro as it makes their goods more competitive in global markets.

Equity markets around the world are, of course, closely interconnected, and changes in one major economy can have ripple effects globally.

“A rate cut by the ECB could be expected to inject liquidity into financial markets, leading to a surge in equity prices. International investors could find opportunities for capital appreciation, especially in sectors that are sensitive to interest rates, such as real estate and utilities.”

Nigel Green concludes: “We now expect that the ECB could be among the first of the major central banks to start cutting interest rates in the first quarter of 2024.

“Investors across the globe will be closely monitoring developments and potentially adjusting their strategies to adapt to the evolving economic landscape.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.