Investment Institute
Weekly Market Update

Take Two: Eurozone inflation falls by less than expected; global stocks hit fresh highs

  • 04 March 2024 (3 min read)

What do you need to know?

Eurozone annual inflation fell by less than expected in February, to 2.6% from 2.8% in January, according to an official flash estimate. Economists had expected the headline figure to ease to 2.5%, while core inflation, excluding energy, food, alcohol and tobacco, was also higher than expected at 3.1% from 3.3% the month before. European Central Bank (ECB) policymaker views have recently diverged, with some expressing a preference for early interest rate cuts while others are keen to wait for further proof of disinflation. We expect the ECB will wait until June before starting to ease policy.

Around the world

The S&P 500, Nasdaq and Japan’s Nikkei indices reached fresh highs on the back of technology sector momentum and hopes that the Federal Reserve (Fed) will start cutting interest rates in June. Meanwhile US fourth quarter (Q4) economic growth was revised slightly lower to 3.2% from an initial estimate of 3.3% - and down from Q3’s 4.9%. The correction reflected a downward revision to private inventory investment. Elsewhere a rise in exports and consumer spending helped Canada’s GDP bounce back in Q4, rising 1.0% (annualised), up from a revised 0.5% contraction in Q3. 

Figure in focus: 9%

The UK’s net zero economy grew 9% last year, while the country’s overall GDP expanded just 0.1%. Companies in the net zero economy - those in sectors such as renewable energy, green finance and manufacturing - contributed some £74bn to the economy, equivalent to 3.8% of GDP, a new report from the Energy & Climate Intelligence Unit (ECIU) said. They also accounted for nearly 3% of total UK employment. However, the ECIU said growth cannot be taken for granted when competition is fierce, and warned against policy U-turns.

Words of wisdom

Core-core index: A measure of inflation closely watched by the Bank of Japan which strips out both fresh food and energy prices, an alternative to the country’s core inflation which only excludes food. Japan’s core inflation slowed for the third consecutive month in January to 2.0% from 2.3% in December, reflecting reduced energy costs, while core-core inflation also slowed to 3.5% in January from 3.7% in December. Meanwhile, Japan’s birth rate fell to a record low last year, the eighth consecutive year of decline. Birth rates were down 5.1% in 2023 from 2022 with the government exploring expanding childcare and higher wages to mitigate further decline.

What’s coming up?

Tuesday is ‘Super Tuesday’ in the US, with 15 states holding primaries and Fed Chair Jerome Powell delivers his semi-annual testimony to Congress on Wednesday and Thursday. On Wednesday, the UK Chancellor delivers his Spring Budget and the Bank of Canada decides on interest rates. The ECB follows with its own monetary policy meeting on Thursday, while US President Joe Biden delivers his State of the Union address that day. On Friday, the Eurozone’s third estimate of Q4 GDP growth is issued and the US releases its latest labour market report for February. 


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