Weekly Digest: E.U. Inflation Cools, Bearish Stock Investors


4 minutes read

Mar 3, 2023

A roaring bear with red stock market indicators on a yellow background

04/03/2023: Eurozone inflation edges lower, investors are bearish on stocks, AI hype comes to crypto, critical situation in Ukraine’s Bakhmut. And more.

💡Quote of the week

“I think we should be bearish on stocks and bullish on inflation. I think we’re in a policy now, which is probably pretty good for Main Street, but it’s going to be difficult and increasingly difficult for financial assets.” David Einhorn, investor and founder of Greenlight Capital

Investment news

gold bars and coins on the shiny surface

⭐Gold down. The gold price dropped on Thursday, snapping a three-day winning streak amid concerns about further interest rate hikes by the US Federal Reserve.

“Near-term challenges remain for gold and the other precious metal on further rate hikes. The focus of market participants remains on U.S. economic data and how it impacts the monetary policy of the Fed,” UBS analyst Giovanni Staunovo said as quoted by Reuters.

🇪🇺 Eurozone inflation. Eurozone inflation slightly eased to 8.5% in February, from a revised 8.6% in January, as food price increases offset declines in energy costs. (CNBC)

However, core inflation rose to an estimated 5.6% in February, up from 5.3% in January. The European Central Bank (ECB) has signaled that it may not be done with interest rate hikes, with another 50 basis point hike on the cards for later this month.

📈 ECB rate hikes. Christine Lagarde, the President of the European Central Bank, suggested that interest rates may need to be raised beyond the upcoming half-point increase scheduled for two weeks from now. (Bloomberg)

Lagarde said in an interview that the upcoming rate hike is necessary and likely, but it's impossible to predict how much interest rates would increase in each subsequent meeting.

🇪🇺 European markets lower. European stock markets experienced losses on Thursday as euro zone inflation eased. (CNBC)

The pan-European Stoxx 600 index initially dropped 0.6%, with travel stocks falling 2% and tech stocks dropping 1.8%. However, construction stocks saw a gain of 0.8%.

😟 The R-Word. Fitch Ratings Inc. has predicted that Germany and Italy will enter into recession due to inflation, while the U.S. may face a modest recession towards the end of this year. (Bloomberg)

According to James McCormack, global head of sovereigns and supranationals at Fitch, the recession in Germany and Italy may not be severe but it is significant. Fitch is expected to release a report later this month elaborating on the forecast.

🤖 AI and crypto: a match made in tech heaven? The popularity of AI-linked crypto tokens is surging, with SingularityNet and SingularityDAO among those experiencing rapid growth. (Bloomberg)

As the hype around these tokens grows, industry insiders warn investors to be cautious. Bloomberg's Hannah Miller joins an episode to discuss what AI-linked tokens are and how they are likely to shape the industry.

📸 Image of the week

A meme mocking Jerome Powell and Fed policies


Greenlight Capital founder David Einhorn photographed at a press conference.
David Einhorn. Source: CNBC.

🤔 Bearish on stocks and bullish on inflation. Greenlight Capital's David Einhorn says inflation and interest rates could shoot up, so he's keeping his negative stance on the stock market. (CNBC)

“I think that both long- and short-term (interest) rates are headed higher and probably higher than what people are expecting,” Einhorn said.

💡Read our SPOTLIGHT to learn how interest rate hikes affect the gold price.

What else is happening

The Russian and Chinese flags with a radioactive sign

⚔️ New arms race? The U.S is concerned about the possibility of making weapons-grade plutonium from Russian fuel delivered to a new Chinese reactor. (Bloomberg)

In December, when Chinese and U.S. diplomats said they'd held constructive talks to reduce tensions, Russian engineers were delivering nuclear fuel to a remote island just off Taiwan's northern coast.

“It is entirely possible that this breeder program is purely civilian. One thing that makes me nervous is that China stopped reporting its civilian and separated plutonium stockpiles. It’s not a smoking gun but it’s definitely not a good sign,” said Pavel Podvig, a Geneva-based nuclear analyst with the United Nations’s Institute for Disarmament Research.

🇺🇦 Russia intensifies assault on Bakhmut. Russian forces relentlessly attacked the eastern Ukrainian city of Bakhmut on Wednesday in their quest for a breakthrough in the year-long war, despite recent U.S. predictions of few short-term territorial gains for Russia. (Reuters)

Russian control of the small mining town would open the door to taking over last urban centers in Donetsk province.

🤖 AI Battle. Elon Musk has approached AI researchers about the possibility of forming a new lab to develop a competitor to OpenAI's ChatGPT, The Information reported citing people familiar with the matter. (Reuters)

Tesla's CEO has hired Igor Babuschkin, a researcher who just left Alphabet's DeepMind AI unit, the report says.

The two have reportedly discussed assembling a team to study AI, but there's no concrete plan to develop any specific products yet.

And finally…

A man searching for gold with a metal detector

🏅 Unearthing history. A trainee volunteer stumbled upon a treasure hoard buried by a forgetful traveler over 800 years ago. (Miami Herald)

The stash included stunning Byzantine-style gold earrings adorned with colorful stones. The only question remains: where did that traveler go? Hopefully, he didn't forget where he parked his horse.


See you next week!


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