Bloomberg Daybreak: Europe 04/09/2024

Summary

Asian stocks experienced a slight increase as attention turns to the upcoming key US inflation data. Treasuries remained stable after the ten-year yield reached its highest point since November, nearly touching the 4.5% mark. Former St. Louis Fed President, James Bullard, suggested that the markets should prepare for three cuts this year but emphasized that the Fed doesn't need to rush into these decisions. In addition, there are ongoing optimistic signals from Israeli officials regarding ceasefire talks with Hamas, although Prime Minister Benjamin Netanyahu warns of a scheduled invasion of Rafah, a city in southern Gaza.

Takeaways

• 📈 Asian stocks experienced a slight increase as the market anticipates key U.S. inflation data.
• 💹 Treasuries showed stability after the ten-year yield reached its highest point since November, nearing the 4.5% mark.
• 📉 James Bullard, former St. Louis Fed President, predicts three interest rate cuts for the year, but advises against haste.
• 🕊️ Israeli officials expressed optimism for a potential ceasefire with Hamas, although Prime Minister Netanyahu warns of an imminent invasion of Rafah.
• 🌐 The focus of the markets is on the upcoming earnings season, which is expected to influence the stock market rally.
• 📊 The U.S. CPI report is highly anticipated and could affect the pace and extent of the Fed's rate cuts.
• 💼 There's been a significant decline in the German property sector, with Q1 2024 marking the weakest start since 2011.
• 🛠️ South Africa remains an attractive destination for investment regardless of the election outcome, according to the outgoing CEO of Nedbank.
• 🚀 TSMC's shares rose as the chip maker received $1.6 billion in U.S. loans and grants to build a factory in Arizona, focusing on two-nanometer chips.
• 🛑 The geopolitical situation in Israel and Gaza continues to impact oil prices, with Brent crude surpassing $90 a barrel.
• 🤝 Germany is reportedly planning a major overhaul of its armed forces, with potential orders worth up to €7 billion.

Q & A

What is the current sentiment in Asian stock markets as attention turns to the upcoming US inflation data?

Asian stock markets are edging higher with a focus on the key US inflation data set to be released tomorrow. This data is crucial as it may influence the Federal Reserve's decision on interest rate cuts.

What does former St. Louis Fed President James Bullard predict for US interest rates this year?

James Bullard predicts that the US markets should expect three interest rate cuts this year. However, he also notes that the Federal Reserve doesn't need to rush into these cuts.

What is the current status of the conflict between Israel and Hamas according to the Israeli officials?

Senior Israeli officials have expressed new optimism for a potential cease fire with Hamas, which would include the release of hostages and Palestinian prisoners. However, Hamas has denied that there are any scheduled talks or an imminent cease fire.

What is the significance of the US CPI report due tomorrow?

The US CPI report is significant as it will provide insights into the current state of inflation in the country. This report could influence the Federal Reserve's decision on whether to proceed with interest rate cuts, which are closely watched by markets worldwide.

How is the US economy performing according to James Bullard?

According to James Bullard, the US economy is performing very well. He cites the successful policy of increasing the policy rate in 2022 which led to a significant decrease in inflation by the second half of 2023. He also mentions that the economy did not go into recession in the second half of 2023 and instead boomed.

What is the impact of the geopolitical situation on oil prices?

The geopolitical situation, particularly the ongoing conflict between Israel and Hamas, has led to increased oil prices. Brent crude has reached over $90 a barrel, influenced not only by geopolitics but also by supply and demand factors.

What is the current state of the Eurozone economy in relation to the ECB's monetary policy?

The Eurozone economy is watching closely as the European Central Bank (ECB) is expected to start lowering rates in June. The ECB's bank lending survey is set to release, which will provide insights into the lending conditions and help guide the Governing Council's decisions.

How is the tech sector performing in the stock market?

The tech sector, particularly companies like NVIDIA, continues to perform well and is leading the stock market rally. This is attributed to strong optimism surrounding these companies and their continued strong performance.

What is the impact of the US interest rate cuts on the bond and stock markets?

If the Federal Reserve does not cut interest rates as expected, it would particularly affect the bond markets as investors would be forced out of their positions due to higher yields. For the stock market, the impact is more mixed, as equities have shown that they can handle higher bond yields as long as companies continue to perform well and the economy remains strong.

What is the significance of the US-China relations on the global chip industry?

The US-China relations significantly impact the global chip industry. The world's biggest chip maker, TSMC, is benefiting from the US loans and grants to build a factory in Arizona, focusing on two nanometer chips. This move by President Biden aims to secure critical technology within the US and reduce reliance on imports from China.

What is the current situation in the German property sector?

The German property sector is experiencing a downturn with the worst first quarter since 2011. Transactions for offices, residential buildings, and warehouses have dropped by 19% compared to a year ago, largely due to high interest rates and a gloomy economic outlook.