Weekly Digest: U.S. Inflation Cools Again, Europeans in Crisis Mood
14/01/23: U.S. consumer prices dropped in December for the first time since May 2020, nearly half of Europeans say their living standards have declined, the World Bank slashes its 2023 growth outlook. And more.
💡Quote of the week
“Global growth is projected to decelerate sharply this year, to its third weakest pace in nearly three decades, overshadowed only by the 2009 and 2020 global recessions.” The World Bank
🇺🇸 U.S. inflation falls to the lowest level in more than a year. The Consumer Price Index (CPI) fell 0.1% in December, meeting expectations, for the biggest drop since April 2020. (CNBC)
Even with this decline, the headline consumer price index rose 6.5% from a year ago, highlighting the burden that the rising cost of living has placed on U.S. households.
💡Read our SPOTLIGHT to learn what the CPI is and how it works.
⭐ Gold goes up. The gold price jumped more than 1% to above $1,900 an ounce on Thursday after data showing signs of cooling U.S. inflation boosted investor expectations for slower rate hikes by the Fed. Shortly after that, gold fell back down to around $1,800 an ounce.
Meanwhile, the silver price rose 1.3% to $23.72 an ounce, platinum was down 0.7% to $1,063.01, and palladium was steady at $1,773.38.
🇪🇺 European stocks on the rise. On Thursday, European markets closed at their highest level since April 2022 following the release of U.S. inflation data. (CNBC)
The pan-European Stoxx 600 index closed 0.7% higher, with most sectors in positive territory.
💶 Experts turning bullish on euro. A potential cooling of rate hikes by the Fed could be positive for the common European currency, which fell below parity with the U.S. dollar in the second half of 2022. (CNBC)
The euro's weakness last year was caused by aggressive monetary policy tightening by the U.S. Federal Reserve, while the European Central Bank raised interest rates much later to contain runaway inflation.
🛑 Perils ahead for global growth. The World Bank slashed its 2023 global economy growth outlook to 1.7% from its earlier projection of 3%. (CNBC)
“Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession,” the World Bank said.
🏦 Is it over yet? HSBC expects the Fed's final rate hike to take place at its January 31-February 1 monetary policy meeting. (Reuters)
The bank also expects the U.S. Federal Reserve to start cutting rates next year.
📸 Image of the week
🐂Back in a bull market. Closely followed strategist Edward Yardeni thinks the outlook for the world economy is actually improving and that the drop in Europe’s natural gas prices suggests Europe may not have a recession. (Bloomberg)
“Investors right now are turning more optimistic about the global economy and looking where values are still cheap,” he said. “We have already had a big run in China, and now they’re looking at Europe. A diversified portfolio makes sense,” he says.
What else is happening
🇪🇺 “We’re in crisis mood.” 45% of Europeans say they are currently having "some" or "a lot" of difficulties with their personal income amid the cost-of-living crisis triggered by the Ukraine war, energy crunch, and surging inflation. (Euronews)
Additionally, 46% of Europeans admit their living standards have already decreased as a result of the mounting crisis, while 39% expect them to deteriorate sometime this year.
🇷🇺 🇺🇦 Slowly breaking the stalemate? Russian human rights ombudsman Tatiana Moskalkova said both Moscow and Kyiv are interested in future contacts between their rights commissioners to discuss prisoner exchange. The comment comes amid intense fighting between Russian and Ukrainian forces over the town of Soledar in eastern Ukraine. (TASS, Reuters)
"We already have concrete results on the search for missing people and return of children to their families. I hope the dialogue is continued. The most important thing is that it should not be politicized, but based exclusively on humanitarian and human rights principles," Moskalkova said.
🎨 Inflation inspires art. In recent years, Argentina's cash has lost so much value that local artist Sergio Guillermo Diaz finds it affordable to paint even on the most valuable banknotes. (Reuters)
"Nowadays, it makes sense for me to paint on the largest denominated bill here in Argentina. Once I paint on it, I can sell it for much more than what the bill is worth," Diaz told Reuters.
See you next week!