Retail sales vs inflation!By Arnaud Masset
In yesterday’s roller-coaster called the market, investors dumped dollars and bought stocks, after worries about inflation were salved by weak retail sales in January. This morning the USD continues to grind lower. EUR/USD is up 0.4% to 1.25, USD/JPY is off 0.7% to 106.25 while USD/CHF touched 0.9229, down 0.55%. The greenback is not out of the woods yet: investors fear the current account and fiscal deficit of the world largest economy. Further USD weakness should be expected.
Initially equities tanked, as January inflation came in well above forecast: the headline printed at 2.1% annually, compared to a 1.9% consensus. European equities and US futures went negative. The Dow Jones lost 2% instantaneously, while the Eurostoxx 50 fell 1.4%. The entire US yield curve shifted upside, and the VIX jumped to 25.7. However, investors soon saw that retail sales contracted 0.3% month-on-month. This should give pause to central bank rate hikes – so back into equities investors went, and major indices ended the day strongly in plus.
European markets shrug off US inflationBy Vincent-Frédéric Mivelaz
Although US inflation rose sharply in January, European markets extended this week’s rally. The Euro Stoxx 50 ended at 3’370 (+0.87%), CAC 40 at 5’165 (+1.10%), DAX at 12’339 (+1.17%), IBEX 35 at 9’686 (+0.37%), FTSE MIB at 22’434 (+1.81%) along with the FTSE 100 at 7’214 (+0.64%). Switzerland’s SMI closed at 8’899 (+1.67%). World stocks also climbed, the MSCI World reached 2’106 points (+1.21%), boosted by Information Technology (+1.84%), Financials (1.69%), Materials (1.29%), Consumer Discretionary (1.28%), Health Care (+1.28%) and Energy (+1.14%).
US 10-year treasuries jumped to 2.91% (+2.57%), a 4-year high, and Eurozone 10-year treasuries increased to 0.757 (+0.98%), their highest rates since September 2015. This might be the dawn of a new era in global bond markets.