Summary for the 11th of April 2019


The UK has received a Brexit extension of six months to the 31st of October. The result is a compromise between Theresa May’s wish of moving the deadline to the 30th of June and the president of the EU council, Donald Tusk ‘s proposal of one year extension. This means the UK might need to participate in the EU’s election next month, something that the UK doesn’t wish to do.

The signals from yesterday’s ECB interest rate decision meeting were similar as the meeting in March. The key ECB interest rates were kept unchanged throughout 2019, or to sustained a convergence of inflation level close to 2%. The ECB was expecting the underlying inflation to rise in a long run. The downside risk in the economy was still high, but according to Mario Draghi, the risk of a recession was low. He said that the inflation expectations had fallen due to a negative risk premium and not due to de-anchoring from ECB’s monetary policy. He also said that the ECB still had plenty of instruments to support eurozone economy.

Mario Draghi didn’t talk about the new system of differentiate deposit rates, but he said the ECB was looking into ways to mitigate the negative effects of negative interest rates. He also didn’t talk about the new TLTRO operations that were introduced in the March meeting.

Yesterday’ FOMC minutes showed that many of the committee members believed the slowdown in the consumer spending was only temporarily. Some members saw the slowdown was because of the government shutdown, while other of the recent financial market volatility. Consumer confidence started to increase, and the household income was rising, both would lead to increase consumer spending. The FOMC Minutes showed that most of the committee members saw unchanged target rate throughout 2019.

US Core Inflation Rate fell from 2.1% in February to 2% in March. The market was expecting unchanged inflation rate. Clothing price fell surprisingly by 1.9% from February to March. Prices on used cars and airline fares also fell. The data confirmed a muted inflation growth, thus supporting the Fed’s decision to keep the target rate unchanged.

Indices for 11th of April.  Economic indicators that support unchanged target rate from the ECB and the Fed have led to a positive closed in the US stock exchange.

Dow: +0.03% (10th  of April)
S&P 500: +0.4% (10th  of April)
Nasdaq: +0.7% (10th  of April)
Nikkei: -0.03% (11th of April)
Chinese indices: -1.8% (11th of April)
STOXX Europe 600 Index: +0.06% (11th of April)

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