The economic landscape is chaotic at the moment.
Financial Investor and Policy Makers Watch List
Investors and Policymakers are actively watching a few important market indicators and corporate milestones. The 10-year German Bund yield has now been reported at 2.72%, while the 10-year Gilt yield is at 4.74%. These figures, along with other economic data, always point to possible changes in monetary policy. Corporate media has been all abuzz. Ubisoft stock jumped due to the Tencent investment, Adidas was just slightly lower after Lululemon’s guidance. Currys stock-price has seen some modest uptick, which may be due to stronger-than-expected UK retail sales data.
CoreWeave, a cloud infrastructure provider, has confirmed its IPO pricing of 37.5 million shares under the ticker “CRWV” at $40 per share. In wider economic news, France’s March Preliminary CPI numbers show a 0.2% month-on-month increase. This growth, while positive, just falls short of expectations, and the year-on-year figures came in below expectation. BCA’s Berezin has warned of an approaching recession led by the deterioration of the US consumer outlook. We expect the European Central Bank (ECB) to reduce its key rate in April. Analysts are already placing the odds at 80% with CPI expectations starting to creep up. Meanwhile, geopolitical tensions have intensified, with reports of former President Trump pushing for control over Ukraine’s mineral and energy assets. Barkin of the Federal Reserve recently expressed worries about near-term instability based on the recent volatility caused by shifts in federal policy. At the same time, the Bank of Japan (BOJ) has warned about growing downside risks originating from the US.
Market Yields and Corporate Developments
Caught in a historic reset, the markets have experienced extreme volatility in both important yield and corporate equity markets. The 10-year German Bund yield, arguably the key barometer of economic health in the entire European continent, is at a low 2.72%. In a parallel move, the 10-year Gilt yield is up to a high 4.74% in the UK. This is a signal of just how bearish investors are on the short-term direction of the economy and the Fed’s monetary policy.
Ubisoft’s stock price has jumped by 10.5% today, throwing the entire corporate world into a tizzy. This is all on the heels of a $100 million investment from Tencent. This savvy play shows the increasing power that global alliances have to make or break the fate of corporations. Adidas’ shares are down 0.5% on the day. This drop followed Lululemon’s release of guidance that was below market projections.
Currys has been one of the few to buck that trend, with a 1.5% increase in its stock price. The basis for the uptick is found in the UK’s retail sales data. That seems to indicate consumer spending is stronger than we had expected before.
CoreWeave’s IPO and Inflation Data
CoreWeave is the cloud infrastructure provider designed to scale. It recently released its IPO pricing, with a share price of $40 for 37.5 million shares to trade on the “CRWV” ticker. This acquisition is perhaps the most significant move yet for CoreWeave. The company is hungry to increase its market share and capitalize on the rapid growth of cloud adoption.
On the inflation side, France’s March Preliminary Consumer Price Index (CPI) figures have been widely criticized. The month-on-month CPI came in at 0.2%, below expectations of 0.3%. In like fashion, the year-on-year CPI was up 0.8%, slightly less than the expected 0.9%. These numbers are a reminder that the inflationary pressures we’ve seen might not be as severe as once believed, helping guide monetary policy moving forward.
BCA’s Berezin has recently released a canary-in-the-coal-mine warning about an approaching recession led by a declining US consumer outlook. This warning amplifies these fears and for a variety of reasons could have broad and multi-dimensional implications for national/global financial markets.
Anticipated ECB Rate Cut and Geopolitical Tensions
The European Central Bank (ECB) is widely expected to lower its key interest rate next month. We think there’s an 80% likelihood that this provision will make it across the finish line. This anticipated move comes amidst rising inflation expectations, with February’s one-year CPI expectations at 2.6%, slightly above the expected 2.5%, and three-year expectations holding steady at 2.4%.
At the same time, geopolitical tensions grow each day. Recent reporting indicates that former President Trump has been calling for the US to take control over Ukraine’s mineral and energy resources. They propose that the US be entitled to all the royalties paid until Ukraine has repaid at least $100 billion, with a 50/50 split after that point. This new ruling further complicates the already complex web of international relations and trade negotiations.
Richmond Federal Reserve President Barkin has responded to the recent policy sea change on the federal government’s part. He terms the resulting near-term instability a “dense fog.” This quote illustrated the great uncertainty that is confronting policymakers as they try to steer through an ever-changing economic environment.
The BOJ has pointed to heightened downside risks originating from the US. These concerns have been seeded by a growing list of factors that raise the concern for global economic instability. These risks are likely to influence monetary policy decisions in Japan and beyond as central banks grapple with balancing growth and inflationary pressures.