Week in review
The US 2-year treasury yield retreated during mid-week to 4.86%, supporting a rally in equities. While markets lowered expectations for Fed’s terminal funds rate, the positive sentiment was boosted further by Atlanta Fed President Bostic’s seemingly dovish speech. Overall, however, the bounce is explained more by technical reasons rather than fundamentals. It must be noted, therefore, that last week’s rally seems less trustworthy, given the fact that it is not underlined by any significant macroeconomic development. Regarding fundamentals, the US inflation has retreated from its swiftly declining trend, while activity data demonstrates resiliency of the US economy. This week’s payroll reading as well as Fed Chair Powell’s testimony will provide more insight into the matter.
Euro Area inflation came in hotter than expected, however compensated by the activity data underperforming forecasts. Preliminary data from February reported the headline inflation at 8.5% y/y (vs 8.2% forecast and down from January’s 8.6%), while the core figure stood at 5.6% y/y (vs 5.3% forecast and up from January’s 5.3%). However, the weak PMI data coupled with lower than expected 4Q22 GDP growth in Italy (1.4% y/y vs 1.7% forecast) and industrial production in France (-1.9% m/m vs 0.1% forecast) have partly reversed the worries on ECB hawkishness. Moreover, the European stocks were also affected by the positive investor sentiment from the US markets, thus mimicking their American counterparts in overall weekly performance.
Week ahead
Macroeconomics: The list of this week’s major macroeconomic news includes speeches from Fed Chair Powell and ECB President Lagarde, US payrolls, Germany and China inflation, UK GDP, as well as retail sales data form Euro Area.
Earnings: The list of this week’s major earnings releases includes FedEx (FDX), Dollar General (DG), and Adobe (ADBE).
