Weekly Digest: Eurozone Inflation Cools, France Riots


5 minutes read

Jun 30, 2023

Flag of the European Union, euro coin, and inflation in the Eurozone.

01/07/2023: Eurozone inflation falls more than expected in June to 5.5%, more than 400 arrested across France amid a wave of protests over a police shooting, Trump says Wagner mutiny leaves Russia’s Putin weakened. And more.

💡Quote of the week

“Wage-price spiral, which are price increases caused by higher inflation, remains a clear burden for (Eurozone’s) core inflation. Therefore, it is likely too early to lower our guard against negative inflationary surprises just yet.” - Clémence Dachicourt, senior portfolio manager at Morningstar Investment Management Europe

Investment news

The front of the Federal Reserve building

🏦 📉 A slowdown. A crucial inflation gauge monitored by the Fed showed a mere 0.3% increase in prices in May as consumer spending slowed considerably, according to a report released on Friday by the Commerce Department. (CNBC)

The personal consumption expenditures price index rose by 0.3% in the month when excluding food and energy. This figure aligns with the estimate provided by Dow Jones. The core PCE recorded a 4.6% increase compared to the same period last year, slightly lower than the anticipated rise of 4.7%.

🇪🇺 Sticky inflation. In June, the Eurozone inflation was lower than expected at 5.5%, showing a significant decrease. However, core inflation, which excludes energy and food prices, remained stubbornly high and rose to 5.4%. (CNBC)

The upcoming data will be under close scrutiny by the European Central Bank, following its decision to raise interest rates to their highest level in 22 years on June 15.

The benchmark rate experienced a 25 basis point increase, reaching 3.5%. This move diverged from the U.S. Federal Reserve's recent decision to pause rate hikes during its latest meeting.

⬆️ Stock rally. European stock markets rose on Friday following lower-than-expected inflation data, signaling a promising outlook as we near the end of the first half of the year. (CNBC)

During morning trading, the pan-European Stoxx 600 index saw a rise of 0.9%, with the majority of sectors experiencing gains. As we reflect on the first half of the year, the index has shown an impressive increase of nearly 7.5%.

Gold poised for decline. Gold prices are set for their first quarterly decline amid growing expectations of more interest rate hikes by the Fed and its global peers.

Spot gold dropped 0.3% to $1,901.99 per ounce on Friday, down 3.4% for the quarter ending June 30. U.S. gold futures fell 0.4% to $1,909.80.

🇺🇸 No recession until 2024? Citi Private Bank predicts the U.S. won't face a recession until the end of 2024. They also believe that small and mid-cap companies in the country could see a strong comeback. (CNBC)

“We were originally anticipating a recession towards the end of 2023, it now has been pushed very far - we’re actually looking much closer to the end of 2024 now for U.S. recession,” Robert Hoffman of Citi Private Bank told CNBC.

Metal oil barrels

🛢️Oil on track for fourth consecutive quarterly decline. Oil prices climbed on Friday but are heading for their fourth consecutive quarter of decline. This downward trend is driven by worries surrounding sluggish global economic growth and weakened fuel demand. (Reuters)

The benchmark Brent crude futures for September delivery saw a rise of 30 cents, or 0.4%, reaching $74.81. Meanwhile, the front-month contract, expiring on Friday, increased by 41 cents to $74.75.

🇹🇷 📉 Lira tanking big time. The Turkish lira plunged to all-time lows on Friday, trading at 24.97 against the greenback, following a significant shift in the country’s monetary policy. (CNBC)

The country's central bank implemented a substantial interest rate increase of 650 basis points, raising the benchmark rate from 8.5% to 15%, marking Turkey's first increase since March 2021.

💥Bitcoin ETF rush. Fidelity Investments, a prominent asset management company, has made another attempt to launch a bitcoin exchange-traded fund (ETF), as stated in a filing on Thursday. This announcement follows closely on the heels of BlackRock's recent filing for a spot bitcoin ETF. (CNBC)

To date, the Securities and Exchange Commission (SEC) has consistently turned down all spot bitcoin fund applications that have come before it. The SEC's primary apprehension regarding a spot bitcoin product revolves around market transparency and the possibility of manipulation.

📸 Image of the week

A meme mocking bank debt policies


Wagner leader Yevgeny Prigozhin
Wagner leader Yevgeny Prigozhin/ Pool photo by Sergei Ilnitsky/AFP via Getty Images

🔫 "For investors, the Russian gun hasn’t fired yet. Sorting out the uncertainties from the Wagner mutiny will take time, and there’s no obvious market play to make." (Bloomberg Opinion)

“What to buy? The chances are that this is not going to have much impact. Nobody quite understands what just happened, after all, so it’s difficult to construct a rationale to buy or sell anything. But the ratcheting up of uncertainty is bound to affect the commodities of which Russia is a big producer,” Bloomberg’s John Authers writes.

🇨🇳 China’s secret $3 trillion. China currently holds a massive $6 trillion in reserves, half of which is "hidden." This situation introduces a new kind of risk to the global economy, American economist Brad Setser says. (Bloomberg)

“China’s lack of transparency here is a bit of a problem for the world. China structurally is so central to the global economy that anything it does, seen or unseen, will eventually have an enormous impact on the rest of the world,” Setser wrote.

What else is happening

Pile of things burning on the street by protesters in France

🇫🇷 France riots. French President Emmanuel Macron has called for another emergency cabinet meeting, marking the second such gathering in just two days. This decision comes in the wake of the most destructive night of riots witnessed thus far, all sparked by protests against the tragic shooting of a teenager by the police. (Reuters)

Overnight, the unrest escalated across various towns and cities in France, resulting in over 200 police officers injured and 875 individuals arrested. Rioters clashed with law enforcement, setting buildings, buses, and other vehicles on fire, while also engaging in looting activities.

🇷🇺 Putin “somewhat weakened.” Former U.S. President Donald Trump, known for his admiration of Russian President Vladimir Putin, said that Putin has been "somewhat weakened" by an aborted Wagner mutiny. Trump suggested that this presents an opportunity for the United States to step in and attempt to facilitate a peaceful resolution between Russia and Ukraine. (Reuters)

"You could say that he's (Putin) still there, he's still strong, but he certainly has been I would say somewhat weakened at least in the minds of a lot of people," Trump told Reuters in a telephone interview.

And finally…

A recently released image, provided in an undated handout, depicts an artist's rendition of the Milky Way as observed through a neutrino lens.
Collaboration/U.S. National Science Foundation (Lily Le & Shawn Johnson)/ESO (S. Brunier)/Handout via REUTERS

A whole new way to observe our galaxy. In an exciting breakthrough, scientists have unveiled a captivating image of the Milky Way using a unique method that doesn't rely on light but rather on ghostly subatomic particles called neutrinos. This marks the opening of a fascinating new chapter in our understanding of the cosmos. (Reuters)

"This observation is ground-breaking. It established the galaxy as a neutrino source. Every future work will refer to this observation," said Georgia Tech physicist Ignacio Taboada, spokesperson for the IceCube research.


See you next week!


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