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The financial cycle and the era of low interest rates
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https://www.caixabankresearch.com/en/monthly-report/443/march-2020/financial-cycle-and-era-low-interest-rates
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Digitalisation and european funds: a winning pair
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Precaution and volatility continued to set the tone across financial markets on Thursday. Eurozone HICP inflation surprised on the upside (headline: 8.5% y/y in February after 8.6%; core: 5.6% after 5.3%) while, in the US, data showed unit labour cost accelerated in Q4 and new weekly jobless claims fell further last week.
Over the past few years, Spain's manufacturing industry has managed to avoid the worst scenarios of a slump in activity (COVID, bottlenecks, energy crisis). However, in 2023 it faces new challenges: the impact of higher interest rates, the effects of supply problems with certain inputs and rising production costs.
Today’s FOMC meeting remained the focus of investor attention in yesterday’s session, with markets currently pricing in the Fed to keep rates unchanged. On the data front, US new home construction fell to its lowest level since 2020 as higher mortgage rates in August appear to have cooled demand.
Despite the effects of the prolonged drought and the sharp rise in production costs, the current trend in Spain’s agrifood sector is one of moderate growth and its exports have managed to remain competitive and dynamic. Moreover, rural tourism is proving to be a good complement to agricultural activity, diversifying the sources of income for farms, which must nevertheless continue working to become more competitive and efficient in their use of resources.
Investors’ mood was mixed yesterday as they grappled with a raft of data. In the US, Treasury yields fell again despite the Fed's hawkish tone on Wednesday, weighed down by concerns about some regional US banks and higher than expected jobless claims, although Q4 productivity and labour cost data were encouraging for disinflationary momentum.
During Tuesday’s session, eurozone investors remained focused on French political risk, while US markets saw some thin trading volumes ahead of the 4th of July holiday. In the eurozone, government bond yields fell and peripheral spreads tightened as the May inflation reading came in line with expectations, easing slightly from May but with service costs stuck.
Financial markets had a mixed session on Wednesday. As investors awaited today's ECB meeting, the biggest macro driver yesterday was the US CPI report for August, which showed that prices rose in line with expectations (0.2% MoM), but core inflation showed some stickiness (0.3% MoM) due to higher than expected costs for housing and other services.
Subdued trading on financial markets on Tuesday ahead of today's US CPI report and tomorrow's ECB meeting. Eurozone government bond yields were flat, while US yields edged slightly higher. On the data front, US unit labour costs rose 0.8% in Q3 (below an expected 1.3%), while the NFIB business confidence index rose to its highest level since June 2021.
Investors kicked off the week on a cautious note after Moody's downgraded the US credit rating from Aaa to Aa1, citing concerns about the country's fiscal trajectory, rising debt burden and high interest costs. With this downgrade, the US lost its only remaining triple A credit rating.
The new expansionary cycle in Spain’s real estate sector is getting stronger quarter by quarter. House sales have been posting double-digit figures for the past three years, there is strong growth in construction and prices are clearly on the up. What will the future bring? As explained in this Report, this positive trend is expected to continue in the sector, both because of the Spanish economy’s good performance and also the healthy state of the industry itself.
La libra esterlina continuó su depreciación mientras Moody's alertaba sobre los costes económicos de un brexit.
Investors traded with optimism during yesterday's session. In Europe, the upward revision of the German Q4 GDP (from +0.1% qoq to +0.3%), supported by exports and construction, led to a rise of 0.5% in Eurostoxx50. European sovereign yields also rose and peripheral spreads widened slightly.
Los principales indicadores de confianza empresarial muestran cómo la guerra en Ucrania ya está teniendo un impacto negativo en la economía de la eurozona, aunque, por el momento, el efecto parece bastante contenido y consistente, incluso, con un crecimiento positivo en el PIB del 1T 2022. Sin embargo, aumentan los riesgos de un freno importante de la actividad en los próximos meses: el consumo privado se podría ver muy afectado por la subida de la inflación y el sector manufacturero se enfrenta a un recrudecimiento de los cuellos de botella. Por su parte, en EE. UU. los datos sugieren que el conflicto está teniendo un impacto minúsculo en la recuperación, si bien con ciertos matices.
El precio de tasación de la vivienda libre avanzó un significativo 2,4% intertrimestral en el 1T 2022 (6,7% interanual). Este repunte de los precios se produce en un contexto de notable aumento de los costes de construcción y de una demanda que sigue creciendo con mucho vigor, mientras que la oferta aumenta de forma más gradual.