Take Two: Eurozone avoids recession; Fed and BoE keep interest rates on hold
- 05 February 2024 (3 min read)
What do you need to know?
The Eurozone narrowly avoided recession in the final three months of 2023 as the economy recorded flat growth on a quarterly basis, according to a flash estimate. It had contracted 0.1% in the previous quarter. Over the 12-month period, GDP rose just 0.5% as the bloc’s economy struggled to gain momentum amid a backdrop of high inflation and interest rates. Meanwhile Eurozone annual inflation edged down to 2.8% in January from 2.9% in December, partly thanks to a fall in energy prices. Core inflation, excluding energy, food, alcohol and tobacco, lowered to 3.3% from 3.4%, though the decline was less than the market had been expecting.
Around the world
The US Federal Reserve (Fed) kept interest rates at their 23-year high of between 5.25% and 5.50% last week, as Fed Chair Jerome Powell pushed back against expectations of an early rate cut, saying he didn’t “think it’s likely” that policy easing would begin as soon as March. The committee’s official statement noted that it would not be appropriate to cut rates until it had “greater confidence that inflation is moving sustainably toward 2%”. Meanwhile Bank of England policymakers held rates steady at 5.25% but one outlier called for a cut to 5.0% while two voted to raise rates to 5.5%.
Figure in focus: $1.8trn
Global clean energy spending surged 17% to a record $1.8trn last year, according to BloombergNEF, including renewable energy installations, electric vehicles (EVs) and hydrogen production systems. However, more than twice this amount is needed to reach net-zero targets by 2050, it said. EVs overtook renewable energy as the biggest area of focus, accounting for $634bn of spending, a 36% increase from the year before. China was the biggest market for clean energy spending with $676bn last year, up 6%. However, investments in the US, UK and Europe grew faster, by at least 22%, boosted by policy measures such as the US Inflation Reduction Act.
Words of wisdom
Brexit 2.0: New UK trade rules introduced last Wednesday, four years after the UK left the European Union (EU). Delayed five times, to allow businesses to prepare for the changes, so-called Brexit 2.0 represents the last phase of the UK’s exit from the trading bloc. The legislation imposes strict requirements on businesses importing food and plants from the EU. While the rules went live on 31 January, border checks will not be implemented for three months. The UK government has acknowledged these rules will lead to higher food prices with a 0.2 percentage point rise over three years.
What’s coming up?
Monday sees several countries including Japan, China, India as well as the Eurozone, UK and US issue final Purchasing Managers’ Indices for January. The Reserve Bank of Australia holds its first monetary policy meeting of 2024 on Tuesday – at its final meeting of 2023 it maintained its cash rate at 4.35%. The US updates on household debt on Tuesday while on Thursday, China publishes its latest inflation numbers and the Reserve Bank of India meets to decide on interest rates. Canada issues its employment figures for January on Friday.
Related articles
View all articles
Letter from China
- by
- 15 April 2024 (10 min read)
Saved by Supply
- by
- 08 April 2024 (7 min read)
March Op-Ed - Direction of travel confirmed
- by ,
- 27 March 2024 (7 min read)
Disclaimer
This website is published by AXA Investment Managers Asia Limited (“AXA IM HK”), an entity licensed by the Securities and Futures Commission of Hong Kong (“SFC”), for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy, sell or enter into any transactions in respect of any investments, products or services, and should not be considered as solicitation or investment, legal, tax or any other advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities under any applicable law or regulation. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation, investment knowledge or particular needs of any particular person and may be subject to change at any time without notice. Offering may be made only on the basis of the information disclosed in the relevant offering documents. Please consult independent financial or other professional advisers if you are unsure about any information contained herein.
Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee such opinions, estimates and forecasts made will come to pass. Actual results of operations and achievements may differ materially. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Information herein may be obtained from sources believed to be reliable. AXA IM HK has reasonable belief that such information is accurate, complete and up-to-date. To the maximum extent permitted by law, AXA IM HK, its affiliates, directors, officers or employees take no responsibility for the data provided by third party, including the accuracy of such data. This material does not contain sufficient information to support an investment decision. References to companies (if any) are for illustrative purposes only and should not be viewed as investment recommendations or solicitations.
All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and that past performance is no guarantee of future returns, investors may not get back the amount originally invested. Investors should not make any investment decision based on this material alone.
Some of the services listed on this Website may not be available for offer to retail investors.
This Website has not been reviewed by the SFC. © 2023 AXA Investment Managers. All rights reserved.