WEF Meeting And ECB Policymakers Rate Comments Draw Attention

The US market resumed its activity after the long weekend break due to Martin Luther King Jr. Day starting a week with a diverse range of economic data releases.

The World Economic Forum’s 54th annual meeting has already started in Davos, Switzerland, drawing attention as political and business leaders from all around the globe will exchange opinions on various matters such as geopolitical tensions, global economic conditions and others.

ECB Policymakers Deflect Rate Cut Rumours

In the eurozone, the ECB’s policymaker Joachim Nagel said that sometimes markets can be very optimistic, adding that inflation remains too high in the euro bloc. Nagel noted that the ECB’s governing board could wait until the summer and then start considering rate cuts. Economists suggest that the first rate cut in the eurozone could materialise in September this year, while also mentioning that Nagel is one of the strict policy supporters in the council.

On the contrary, the head of the Austrian central bank, Robert Holzmann, told CNBC reporters attending the Davos WEF meeting: “I cannot imagine that we’ll talk about cuts yet, because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year.”

UK CPI December 2023 Report

On Wednesday morning, the Office for National Statistics (ONS) will publish data regarding the country’s CPI inflation in December. Economists expect the report to show a 0.2% rise on a month-to-month basis. On a year-to-year basis, CPI inflation is expected to come in at 3.8%, slightly less than November’s figure.

Since March 2023, headline CPI in the UK has more than halved, slowing from 10.1%. Some market analysts speculate that the Bank of England might be closer to cutting rates in 2024 than had been originally priced. However, they do suggest that inflation has dropped due to fuel prices retreating while average earnings have risen for many consecutive months.

China GDP Q4 2023 Report

On Wednesday morning, China’s National Bureau of Statistics (NBS) will publish the GDP survey for the fourth quarter of 2023. A Reuters report said that “gross domestic product (GDP) likely grew 5.2% in 2023 - meeting the government's annual growth target, partly helped by the previous year's low-base effect which was marked by COVID-19 lockdowns, according to the median forecasts of 58 economists polled by Reuters.”

The same poll showed that market analysts expect the Chinese economy to likely slow to 4.6% in 2024, and even more to 4.5% in 2025. It should be noted that the country’s real estate sector took a hit during 2023 with economists suggesting that it could play a significant role in the economy’s rebound.

German GDP Shrunk In 2023

The latest survey by Destatis showed that the German economy shrank in the fourth quarter of the year by -0.3% on a quarterly basis. Although the German economy got smaller, it avoided technical recession as Destatis revised the third quarter’s figure to 0%. The last quarter’s figure was slightly better than anticipated by analysts. German GDP is still 0.7% higher than what it was in 2019, the year before the onslaught of the Covid pandemic.

Commenting on the news regarding Germany’s economy, ING economists noted that “the German economy shrank by 0.3% year-on-year in 2023. What’s worse, however, is that there is no imminent rebound in sight and the economy looks set to go through the first two-year recession since the early 2000s. All in all, we expect the current state of stagnation and shallow recession to continue. In fact, the risk that 2024 will be another year of recession is high. We expect the German economy to shrink by 0.3% year-on-year this year. It would be the first time since the early 2000s that Germany has gone through a two-year recession, even though it could prove to be a shallow one.”

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