US : form PPI to CPI
US producer prices (PPI) rose in April more than projected – further evidence that it will take time for inflationary pressures to abate
- PPI Ex-Food & Energy (MoM) in April +0.5% (+0.2 expected)
- However details offer relief for Fed officials as key categories that feed into PCE measure were more muted
US consumer prices (CPI) for April matched estimates – MoM data climbed less than expected providing optimism that progress on inflation is being made
- CPI (MoM) in April 0.3% (+0.4% expected)
- After data Fed swaps began pricing a faster pace of 2024 rate cuts
- Data dependency remains the guiding star, so policy decision could depend on house prices in Detroit!
Eurozone : soft landing on track
The European Commission has reviewed its estimates for 2024/2025 indicating a soft landing scenario with inflation falling more quickly and growth picking up next year
- GDP for 2024 at +0.8% and + 1.4% for 2025 – in line with previous forecast
- Inflation slowing to 2.5% in 2024 and 2.1% in 2025, down from 2.7% and 2.2% previously
- However public debt is set to increase next year – by 3% in 2024 and 2.8% in 2025, up from 2.8% and 2.7% before – France and Italy with bigger shortfalls whilst smaller ones for Germany and France
- European government bonds rallied across the board on the news
To sell or not to sell?
- “Sell in May and Go Away…”
“…but remember to buy back in November” - Also known as The Halloween Effect, this old adage has been the object of infinite studies
- In efficient markets, it should not exist
- There doesn’t seem to be a definitive answer • September also rhymes well, so take your pick!
- Two assets : S&P 500 (ETF) and US money market • Hold S&P from November to April, then switch to money market from May to October
- We look whether in the summer months it was better to stay invested or to stay in cash
- As expected, the results are mixed, see 2008 and 2009 or 2020 and 2022
- trading rules should come with a health warning!
After the swiss, the swedes
- The Riksbank cuts rates by 0.25%, to 3.75%
- First cut since 2016
- Recent inflation data was encouraging
- After the Swiss National Bank, this is the second European central bank to cut rates
- As the Eurozone is Sweden’s main trade counterpart, the exchange rate will be watched carefully
- Weakening of the Swedish Kroner could re-ignite inflation
- The Central Banks is concerned about the state of the economy…
- …and this is starting to dominate the debate amongst policymakers
- Other central banks will follow
Earnings - positive momentum continues
Where are we in the reporting season?
- In Europe, 65% of the STOXX 600 companies have released Q1 figures, with an average earnings beat rate of 58%, well ahead of Q4 and above the ten-year average (53%)
- Looking at sales, the beat rate was 47%, below historical levels (54%) and below earnings beats, as in previous quarters
- By sector, the main beats were in Financials and Energy. Information Technology missed expectations, with 56% of the results missing consensus earnings estimates (62% for sales)
- In the US, the current earnings season is on track to be the strongest in more than 2 years
- On average, companies reported earnings 7% above expectations, the largest margin since Q4 2021
CEE - a business smart region
Central and Eastern Europe (CEE) is well positioned to become the “Made in Europe” hub for the 21st century. The fundamentals that have made CEE successful since the start of the millennium are attracting a growing wave of companies
- A business-friendly environment, with significant lower tax rates and employment costs than Western Europe
- GDP growth rates that have surpassed those of Western Europe and are forecast to grow twice as fast as the EU 27 average
- Rising domestic consumption
- A skilled, cost-effective workforce at all levels of education
- Significant and ongoing EU inflows for infrastructure investments (road, rail, air, water)
- A robust manufacturing base with increasing complexity and diversity of local economies (nearshoring)
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The analyses and forecasts contained in this publication are based on assumptions, estimates and hypothetical models which may prove to be incorrect and therefore lead to substantially different results.