The Fed’s fear of faster interest rates continues to terrorize global stock markets, but it is possible that the better is waiting for us. This is a brief description of the past week in the financial markets, where investors continued to monitor developments in US 10-year Treasury bonds and their impact towards the rotation of technology stocks. And what were the main events of the past period?
Highly monitored US inflation data turned out more as expected. Year-on-year price growth in the United States reached seven percent, which is slightly higher than the market consensus. The main core inflation then strengthened by 5.5 percent year on year. The peak of the price level is now expected around the middle of 2022. It will certainly be interesting to see if this really happens. These numbers will rather support the Fed in the opinion that this time it should not raise rates gradually, but rather accelerate the tightening of monetary policy.
Lubomír Lízal: High inflation will help the government with debt, but only for a moment
Low interest rates are bad for the financial sector, now it will be better for the profits of banks and insurance companies. The central bank wants to cut inflation expectations, which go mainly through wages, says ex-central banker and head of the Czech branch of Expobank Lubomír Lízal. The bank is currently looking for a buyer.
At the same time, there were comments from some members of the US Federal Reserve about the reduction of the balance sheet and overflowing balance sheets in the order of trillions of dollars. I would like to remind you that the bank’s balance sheet has been increasing in the last two years by buying US government or MBS bonds. This, together with rising interest rates, could have a significant impact on the world’s stock markets, and the Fed can be expected to be very careful in its efforts not to disrupt the ongoing economic recovery in any way. I’m guessing that while the rate hike may be steeper, the balance sheet decline will be really slow.
Negotiations on Ukraine have not turned out
Talks between NATO and Russia have so far not brought any diplomatic breakthrough about the situation in Ukraine. US Deputy Secretary of State Wendy Sherman said on Wednesday that Russia had not committed itself to a de-escalation at the Ukrainian border after two rounds of diplomatic talks this week, and acknowledged that it was still unclear whether Moscow intended to use the week’s talks as an excuse to say diplomacy cannot work.
The question remains as to how both sides have room to keep their faces in front of voters and citizens, while negotiating a compromise that would calm the situation and avoid Russia’s armed participation in Ukraine. It will certainly be interesting to keep an eye on this and it is only a matter of time before events could have a significant impact on market developments.
Shares of French EDF fell. The government wants huge electricity discounts for her
Shares of the French energy company EDF fell by as much as 25 percent on Friday, but during the day they erased some of the losses. This is in response to a French government order requiring a company to sell more electricity at a huge discount in an effort to curb skyrocketing energy prices. EDF said that this step will cost it up to 8.4 billion euros (205.6 billion crowns) and therefore worsened the outlook for this year, writes Reuters.
Inflation in the Czech Republic? Maybe up to 10 percent
The current statements of members of the Bank Board, Holub and Mora, had the greatest impact on the domestic economy. “Inflation in the Czech Republic may attack 10 percent at the beginning of this year. It will gradually start to decline from the second quarter, ”expects CNB Bank Board member and economist Tomáš Holub. In another interview, the vice-governor of the Mora bank stated that he would estimate inflation at nine percent at the beginning of the year, but even a double-digit number, ie 10 percent inflation growth, is not unrealistic. The rise in prices will start to subside in the spring and the CNB will have to “swing well over four” with rates.
Personally, I think we are still witnessing tensions in the supply chains that will still be here with us, it was seen in a week in the aluminum market, where shortages are pushing prices to their peaks and there is no indication that this should change immediately. Given the end of the year and the price pressures associated with gas and electricity, I can imagine that the estimate of the end of the rise in the price level in the quarter of 2022 may be very optimistic. We may have to come to terms with the fact that “soaring” inflation will exist with us for some time to come.
Czechs are increasingly addressing the price of food
Inflation and coronavirus are forcing more Czechs to look at the food price tag, according to a KPMG survey. Most people don’t spend more than four thousand a month on food.
Inflation figures for December in our economy then exceeded market estimates at 6.6 percent year on year. The analytical consensus was set six tenths less. However, the numbers for January will be more interesting. When everyone who produces will have to accept higher costs and energy in their costs and translate them into the final prices of their products. Employees in companies will also push for wage increases and will continue to support this carousel. If the jump in January inflation was less drastic (understand significantly less than the threatening 10 percent), it can be expected that the CNB will not push the rates to five percent so much at its meetings.
In width and height. Everything can be built from wood
As in many other fields, sustainability issues are crucial in today’s architecture. And the possibility of building with respect for nature is the use of wood. Constant innovations in the construction process also enable the use of this material for gigantic objects, including social and cultural buildings.
The goods will not be so cheap. Ports in China are congested and ships are delayed
A new variant of the coronavirus omicron is rapidly spreading among Chinese logistics workers. Land transport is unable to take over containers and ships are clogging the ports of Taijen and Tianjin, with Ningpo, one of the world’s ten largest ports, also reporting problems. For example, Airbus and Volkswagen, for which these ports are the gateway to China, have problems, writes the Bloomberg agency.