• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Investing Eurozone inflation beats expectations, what will ECB do?
Investing

Eurozone inflation beats expectations, what will ECB do?

by January 6, 2023
by January 6, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

I wrote on Wednesday about how optimism had jumped in the wake of softer-than-expected inflation numbers out of France. Markets moved upward as investors turned their eyes towards today, when the all-important eurozone inflation numbers were to be announced, hoping that the positive French reading might signal that today would also bring kinder news.

Eurozone inflation better than expected

They have got their wish. Eurozone inflation has come in at 9.2%, south of expectations of 9.5%. The previous month’s reading was 10.1%, meaning a healthy 90 bps drop and a move back into the single digits.

Core inflation remains high

But hold off on popping the champagne because it is not all good news.

Core inflation, which strips out the more volatile items of food and energy, rose to a new high of 5.2%. This implies that falling gas prices are pulling down the headline number (9.2%), yet the underlying causes of the cost-of-living crisis remain present, as seen in the rising core number.

Traditionally, it is this core number that policymakers pay attention to. Monetary policy is geared towards this metric as food and energy are too volatile and move based off too many variables to be within the remit of central banks’ control, which has been glaringly obvious this past year with the invasion of Ukraine causing energy prices to go bananas.

Looking at the below chart paints a vastly different picture, showing the upward trend remains.

What will the ECB do?

With core inflation still on the up and well north of the 2% target outlined by the ECB, a further programme of interest rate tightening is needed. Rates are currently at 2% – well below what is being seen on the other side of the Atlantic with the Federal Reserve having hiked past 4% – and analysts had before this week been anticipating a further rise up towards 3.5%.

With four hikes being implemented by the ECB last year, the eurozone is already staring a recession right in the face. The area has come under intense pressure in the wake of the Russian invasion of Ukraine, with both an energy crisis and a cost-of-living crisis gripping countries across the bloc.

The Stoxx 600, a stock market index which captures 90% of market capitalisation across 17 nations, peeled back close to 13% last year. Looking at selected individual nations, the German DAX fell over 12%, French CAC 40 dropped 9.5% and the Spanish IBEX 35 gave up 5.7%.

The news comes off the back of ECB President Christine Lagarde’s hawkish tone in December:

“We’re not pivoting, we’re not wavering, we are showing determination.”

Stock markets tread cautiously

In the immediate aftermath of the news, European stocks were cautious. The Stoxx 600 was flat, appreciating the drop in the headline number but refusing to move upward given the stubborn core figure.

The index is up 2.5% thus far this year, with expectations seemingly priced in that inflation would be worse than what has transpired. The index had banked three consecutive days of positive moves earlier this week.

 Eyes will now turn to the States. US non-farm payrolls are expected out today, before next week gives the all-important CPI number.

2022 was summed up by stock markets moving off the back of central bank decisions on interest rate policy, as policymakers scrambled to get inflation under control. 2023 has commenced the same way. There is a long way to go yet, and it appears this will be the case for the first half of the year at least.

The post Eurozone inflation beats expectations, what will ECB do? appeared first on Invezz.

You Might Also Like
  • Volatility Skewness | IV Skew In Options
  • American vs. European Options: The Differences
  • This award-winning editor says Bob Iger could sell Disney to Apple
  • Civil Rights Groups Say Elon Musk to Blame for Twitter Advertiser Exodus
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Renesas Announces Its First Wi-Fi Development Kit with Support for New Matter Protocol
next post
2022 in Review: A Sudden Shock of Realism

You may also like

Oak Street Health stock just rallied 30%: explained here

January 10, 2023

Cramer double downs on Disney shares as Bob Iger retakes...

November 29, 2022

FTSE 100 price forecast ahead of the last trading month...

November 30, 2022

Should you buy the euro amid ECB’s Schnabel keeping a...

November 25, 2022

Elon Musk: here’s why Tesla stock continues to sell-off

December 21, 2022

4 economic events to move the FX market in the...

December 29, 2022

2023 US economic outlook given the Fed-induced economic recession

December 28, 2022

As Glazers seek sale, how much is Manchester United worth?

November 28, 2022

CBI says the UK is in a “short and shallow”...

December 5, 2022

Buy Microsoft stock on the coming ChatGPT-enabled Bing: Analyst

January 5, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Week Ahead: NIFTY Stays In A Defined Range; Moving Past This Level Crucial For Resumption Of Upmove

      May 31, 2025
    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,582)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Week Ahead: NIFTY Stays In A Defined Range; Moving Past...

      May 31, 2025
    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,582)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Silvergate Capital shares plunge nearly 50%...

    January 5, 2023

    Sarat Sethi says oil and gas...

    November 23, 2022

    Steady PutWrite 2022 Year In Review

    January 16, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here