Market Overview: January 16, 2024

Germany’s economy shrank in 2023

The German economy shrank by 0.3% in 2023, the Federal Statistical Office of Germany said on Monday.

The contraction in output declined to 0.1% when adjusted for calendar effects.

“The overall economic development in Germany came to a standstill in 2023 in a still crisis-ridden environment,” said Ruth Brand, head of the Federal Statistical Office.

The manufacturing sector, excluding construction, fell by a sharp 2%, led by a decline in production in the energy supply sector. The fourth quarter saw a similar decline of 0.3% compared to the period from July to September.

Markets await inflation in the eurozone and the Fed speaks!

Data on consumer price indices for Germany and Italy will be released on Tuesday. The main inflation index in Germany is expected to rebound to 3.7% from 3.2%.

Data on the Empire State Manufacturing Index in the United States for January will also be released. It is expected to decline by -5.00 points in January after falling by -14.5 points in December.

We will also see a speech by Federal Reserve member Christopher Waller today, in which the focus will be on the interest rate, the date of the cut, and the Fed’s reaction to recent inflation data.

JPMorgan CEO warns markets of US inflation

During his speech to comment on JPMorgan’s earnings (NYSE:JPM) released at the end of last week, Jamie Dimon, CEO of JPMorgan, warned investors not to be fooled by inflation data and believe it is on track to decline smoothly. Dimon’s most notable statements in this regard were as follows:

The US consumer price inflation may show higher than expected stability.

The expectation of six or even seven interest rate cuts by the Federal Reserve during its meetings this year seems to be highly exaggerated.

Interest rates may become higher than markets expect.

Markets should take into account the large amounts of government spending and past and ongoing stimulus and its impact on inflation.

US economic growth is fueled by large amounts of government spending and stimulus.

There is also a continued need to increase spending due to the green economy, the restructuring of global supply chains, rising military spending, and rising healthcare costs.

Gold falls with rising dollar and Treasury yields

Gold fell slightly on Tuesday as the dollar and US Treasury yields rose as investors awaited comments from a group of Federal Reserve officials this week to gain more clarity on the path of interest rates.

The spot price of gold fell 0.4% to $2,040.35 an ounce.

The dollar index jumped to its highest level in ten days, making bullion less attractive to holders of other currencies, while yields on the benchmark US 10-year Treasury note rose to hover near 4% levels.

The central bank is expected to hold interest rates steady at the end of its meeting on January 30 and 31.

Traders are betting on six interest rate cuts of 25 basis points each this year, and expect the first operation to take place in March.

A decline in interest rates increases demand for buying gold, which does not generate income.

A group of Fed officials are scheduled to speak this week, including Christopher Waller, a member of the central bank’s board of governors, who will deliver a speech on economic prospects to the Brookings Institution at 4:00 PM GMT.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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