Weekly Digest: Eurozone Facing Recession, Gold Rally
07/01/23: The eurozone may have already slipped into a recession, gold surges to a 6-month high, the world economy is supposedly heading for the worst year in 40 years. And more.
💡Quote of the week
“2023 will be a year of global recession, but investment opportunities will arise from the continued desynchronization between the three largest economic blocs – the U.S., the euro area, and China.” Carmignac, a French asset management firm.
🏦 The Fed releases minutes from its December meeting. All officials agreed that the central bank should slow its aggressive rate hike pace and raise rates gradually to control inflation and limit economic growth risks. (Reuters)
"Most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance," the minutes said.
💡Read our SPOTLIGHT to learn how interest rate hikes affect the gold price.
⭐ Gold surges to a 6-month high. The price of gold hit a six-month high on Tuesday, to just a little below $1,850 an ounce, and analysts believe the rally will continue in 2023.
“It is our opinion that central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold for years to come. We, therefore, believe gold will end 2023 at least 20% higher, and we also see miners outperforming gold with a factor of two,” Eric Strand, manager of the AuAg ESG Gold Mining ETF, said as quoted by the CNBC.
💡Will the price of gold reach a new record in 2023? Read our SPOTLIGHT to find out.
📈 Stocks go up. The S&P 500 closed higher on Wednesday after the release of minutes from the Fed’s meeting, showing officials were focused on controlling inflation even as they slowed interest rate hikes. (Reuters)
"The market is like a kid asking for ice cream. The parents say 'no,' but the market keeps asking because the parents have caved in the past. The market still thinks it's going to get ice cream, just not as soon as they thought before,” Burns McKinney, portfolio manager at NFJ Investment Group LLC in Dallas, said.
🇪🇺 European shares rise on upbeat economic data. European markets extended gains on Wednesday as inflation data out of France and Germany signaled that consumer price increases across the eurozone are slowing. (Euronews)
The pan-European Stoxx 600 closed up 1.4% on Wednesday, led by retail stocks, which added 3.3%.
Preliminary data showed inflation in France slipped in December from a record high following a series of encouraging data, including an increase in eurozone manufacturing numbers and a slowdown in German inflation.
🇬🇧 Bad news for the U.K. recession. In its 2023 macro outlook, Goldman Sachs predicts U.K. real GDP will shrink by 1.2% this year. This figure places Britain just ahead of Russia, which is projected to see a 1.3% contraction in 2023. (CNBC)
The euro area and the U.K. are both already in recession, Goldman Sachs' Chief Economist Jan Hatzius and his team concluded, as both have experienced a “much bigger and more drawn-out increase in household energy bills” that will lead to higher inflation than elsewhere.
📉 2023 might be one of the weakest years for the world economy in 40 years. In its 2023 outlook, Barclays expects advanced economies to slip into recession and forecasts global growth at just 1.7%. Credit Suisse expects the eurozone and the U.K. to have already slipped into recession. (Bloomberg)
“These economies should bottom out by mid-2023 and begin a weak, tentative recovery – a scenario that rests on the crucial assumption that the US manages to avoid a recession,” Credit Suisse said in its outlook.
💡How to prepare for a recession? 5 things you need to know.
📸Image of the week
🤔 Will crypto ever be a safe investment? While big institutions are stepping up as custodians of digital assets, some regulatory gaps can only be filled by new laws. (Bloomberg Opinion)
“This anxiety-inducing uncertainty should ease with more crypto investments moving to normal bourses as regular securities, no different from stocks and bonds. That will bring customer assets under the umbrella of standard safeguards, precluding the need for costly legal maneuverings to recover one’s money,” Andy Mukherjee writes.
What else is happening
🇷🇺 Russia sends new hypersonic cruise missiles to the Atlantic. Russian President Vladimir Putin on Wednesday sent off a frigate towards the Atlantic and Indian oceans armed with new hypersonic Zircon cruise missiles, which he said were the first of their kind. (CNBC)
“This ship, armed with ‘Zircons’, is capable of delivering pinpoint and powerful strikes against the enemy at sea and on land,” Russian Defense Minister Sergei Shoigu said.
🌞 “Feels like summer.” Record-high winter temperatures swept parts of Europe over the new year, prompting activists to call for faster climate action while providing short-term relief to governments struggling with high gas prices. (Reuters)
Temperature records have been broken at hundreds of sites in the last few days, from Switzerland to Poland to Hungary, which registered its warmest Christmas Eve in Budapest and saw temperatures climb to 18.9 degrees Celsius on January 1.
👟 “Moonwalkers.” A U.S. start-up, Shift Robotics, has invented a device designed to be strapped onto your shoes and make you walk about three times faster than you normally would. (Euronews)
With these “Moonwalker” shoes, you could be walking at up to 11 km/h.
See you next week!