ECB Minutes Indicated "High Levels For A Long Time"

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US stock indices were not traded yesterday due to the bank holiday. With US markets closed on Thursday due to the Thanksgiving holiday and facing a shorter trading session on Friday, currencies and US indices are likely to trade subdued today, but possibly with some volatility as liquidity is expected to remain tight.

Equity markets in Europe were mostly up yesterday. Germany's DAX (DE40) rose by 0.23%, France's CAC 40 (FR40) gained 0.24% on Thursday, Spain's IBEX 35 (ES35) jumped by 0.30%, and the UK's FTSE 100 (UK100) closed positive 0.19%.

The minutes of the latest ECB meeting confirmed the more cautious tone that ECB President Christine Lagarde had already shown in a press conference in October. The minutes emphasized the ECB's more cautious view on the economy and essentially outlined the next phase of monetary tightening: halting rate hikes and aiming for "high levels for a long time." Clearly, it was and still is too early for the Central Bank to close the door on further rate hikes completely.

Sweden's Central Bank (Riksbank) left the interest rate unchanged at 4%, but concerns about inflation and currency issues have led policymakers to threaten another rate hike and start discussions about accelerating bond sales. The latest CPIF core inflation figure was almost in line with the Riksbank's forecast, although it slowed less than expected. Core inflation is at 6.1%, and the Riksbank has consistently emphasized that this rate is too high and there is a risk that the decline will be slower than expected. The statement makes clear the possibility of another rate hike if inflation does not fall in line with the Bank's expectations, and rate forecasts still point to a peak of 4.10%.

Huw Pill, chief economist at the Bank of England, said the Bank must stand firm in its fight against inflation and cannot afford to loosen tight monetary policy. Pill said the economy has seen slow growth in activity and unemployment, but this is largely supply-driven and not related to easing inflationary pressures. Economists expect the Bank of England to keep the bank rate at a 15-year high of 5.25% until at least July 2024.

Brent crude oil declined again on Friday, extending losses from the previous session as traders doubt OPEC+ will come to an agreement on further production cuts. The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, surprised the market when they announced Wednesday that they would postpone their ministerial meeting by four days to November 30 after producers failed to reach a consensus on production levels.

Asian markets were predominantly up yesterday. Japan's Nikkei 225 (JP225) was not trading yesterday, China's FTSE China A50 (CHA50) decreased by 0.72% on Thursday, Hong Kong's Hang Seng (HK50) was up 0.99%, and Australia's ASX 200 (AU200) ended negative 0.62%.

In Japan, inflation is on the rise. The nationwide core CPI rose from 3.0% to 3.3% year-over-year (forecast 3.4%). Despite the fact that the actual value turned out to be less than forecasted, price growth was observed in almost all categories — both for goods and services. At the same time, on a month-on-month basis, inflation rose by 0.7%, the fastest growth in history (except for periods of indirect tax increases). This performance contradicts the Bank of Japan's forecast of a slowdown in inflation by the end of the year.

The government will continue efforts to curb price increases by extending energy subsidies until next April and offering tax breaks for low-income households. Economists believe the Bank of Japan will abandon its ultra-accommodative policy next year if inflation and wage growth continue to accelerate.

  • S&P 500 (F)(US500) 4,556.62 0 (0%)
  • Dow Jones (US30) 35,273.03 0 (0%)
  • DAX (DE40)  15,994.73 +36.91 (+0.23%)
  • FTSE 100 (UK100) 7,483.58 +14.07 (+0.19%)
  • USD Index  103.76 -0.16 (-0.15)

News feed for 2023.11.24:

  • Japan National Core CPI at 01:30 (GMT+2);
  • Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • Japan Services PMI (m/m) at 02:30 (GMT+2);
  • German GDP (q/q) at 09:00 (GMT+2);
  • German Ifo Business Climate (m/m) at 11:00 (GMT+2);
  • Eurozone ECB President Lagarde Speaks at 11:00 (GMT+2);
  • Canada Retail Sales (m/m) at 15:30 (GMT+2);
  • US Manufacturing PMI (m/m) at 16:45 (GMT+2);
  • US Services PMI (m/m) at 16:45 (GMT+2).

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Disclosure: This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, ...

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