The world stock markets are having a significant setback in recent days reflecting the investment spirit. A report prepared by Bolsamanía attempted to give five explanations why the main US, European and Asian indices fail to recover.
1. The statements ‘hawkish’
It is surely the main reason that is penalizing European stock markets. In recent days, and within the framework of the Davos Forum, several members of the European Central Bankwho have ‘raised the feather’ about rate cuts, spreading the idea that, perhaps, there will not be the reductions that the market expects this year and that, if there are, They will arrive later than expected.
The president of Bundesbank, Joachim Nagel said this Monday that the markets are too optimistic about the prospect of cuts of types, and that it could be summer before the issue is discussed.
These statements contrast with those of Christine Lagardewho this Wednesday said that he sees it “probable” that the ECB lowers rates “in summer”, a scenario considered by consensus. Of course, he clarified that it has to be “reserved” because everything will depend on the data. “Some indicators are not anchored at the level we would like to see them.”
From another point of view, the governor of the FedChristopher Waller also rejected market expectations this week. six rate cuts this year.
“His comments that rate cuts must be done methodically, carefully, and in a calibrated manner, point to a central bank that is not in a hurry and that thinks quick cuts are not necessary. This approach tends to dismiss the idea of a cut in March and suggests the central bank will rely heavily on data,” Hewson wrote.
2. Negative data in Europe
Like the December CPI in the United Kingdom, with an increase to 4% compared to the forecast of 3.8% and the previous data of 3.9%. These types of references they do not reassure a market at all that, as Lagarde rightly says, she makes her decisions ‘data by data’.
“(Yesterday’s) inflation figures in the United Kingdom serve to reinforce the challenge facing the Bank of England trying to return inflation to its target, and show that the process is unlikely to be linear,” commented Michael Hewson.
3. Bad data from China
China is always in the spotlight and China seems to continue to disappoint. It is not growing as expected, it is not recovering from the pandemic as expected.
On Wednesday it disappointed with its GDP. Although the Chinese economy grew above expectations in 2023 (the estimate was 5% and it advanced 5.2%), in the fourth quarter it grew 5.2% compared to the expected 5.3%.
“He Chinese economy’s growth momentum slowed in the fourth quarter of 2023. We expect annual growth to slow to 4.4% in 2024 as the effects of reopening wear off, the real estate sector remains a drag and government policies focus on containing risks to the economy. rather than providing a significant boost to growth,” said Sophie Altermatt, economist at Julius Baer.
4. The triumph of Donald Trump vs China
The overwhelming victory of donald trump in Lowa, which gives him a considerable advantage in the race to elect the Republican candidate for the presidential elections on November 5, has a derivative in the form of concern about the possible resurgence of the trade war between the US and China if, in the end, Donald Trump becomes US president again.
In everyone’s memory is the tense relationship that existed between the two superpowers during the Trump era, which occupied all the front pages until the Covid-19 pandemic broke out and the focus of attention shifted to the health situation.
Experts also refer to the result of the Taiwan elections this past Saturday, with the victory of the Democratic Progressive Party (DPP), which was already in power, and which It may bring with it a rebound in the rivalry between China and the United States.
5. The situation in the Red Sea
As such, the tension that is being experienced in the Red Sea, with rebel attacks on cargo ships, cannot be said to be, for now, having a striking economic impact. Even energy prices are holding up despite the escalation of the conflict. However, it is a latent concern of unforeseeable consequences if it goes further.
Source: Ambito
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