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SPI Management Newsletter 03.02.2023

ECB, the BOA and the FED raise rates - offer differing forecasts

In order to reflect the region's unequal development, inflation, and the quick reopening of China's economy, Europe's major central banks increased their benchmark interest rates by 0.5 percentage points but differed from the Federal Reserve and from the BOA on their expected next movements.

The European Central Bank increased its benchmark rate to 2.5% on Thursday, marking its fifth consecutive significant hike, and indicated that another half-point rate increase would be implemented in March. That puts the ECB behind the Fed, which boosted rates on Wednesday to 4.5% to 4.75%, and the Bank of England, which raised rates by a half percentage point to 4% earlier on Thursday.

As inflation starts to decrease in several major nations and GDP is anticipated to slow, particularly in the United States, investors are intently monitoring any indications that central banks would halt a string of aggressive rate rises. Investors predict that major central banks would not only soon cease rate increases but also start cutting rates later this year, even while policymakers continue to underline that inflation remains above target.

At a news conference, ECB President Christine Lagarde said the ECB would “stay the course” and stressed that its job was “not done,” indicating that the bank will increase rates over the coming months more quickly than the Fed and Bank of England.

Fed Chair Jerome Powell made an effort to avoid stoking rumors about an interest rate pause. “We’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive,” Mr. Powell said at a news conference after the central bank’s policy meeting.

Apple reports its first decline in revenue in three and a half years

Due to "significant" supply chain interruptions in China, Apple saw its first quarterly revenue decline in three and a half years. These delays occurred during the crucial holiday shopping season.

The worse-than-expected results came after shipments of Apple's high-end iPhones were hampered by an outbreak of Covid-19 at an assembly facility run by partner Foxconn in Zhengzhou. This incident underlined Apple's dependence on China for production. After-hours trading saw a more than 3% decline in Apple stock.

Amazon and Alphabet both noted further deterioration in some of their primary markets in the most recent quarter, which coincided with Apple's revenue shortfall. A day after Facebook owner Meta's stronger than anticipated profits helped spark a rapid rise in technology markets, the earnings reports from three of the largest firms in the world collectively offered a warning to investors.

IMF Improves Global Economic Outlook as Inflation Declines and China Reopens

The International Monetary Fund predicted that the world economy will expand a little quicker than originally anticipated due to resilient demand, declining inflation, and China's reopening.

The IMF increased its estimate of global economic growth this year from 2.7% in October to 2.9% in its most recent World Economic Outlook, which was released on Monday, Washington time. The IMF anticipates growth to go up to 3.1% in 2024, which is still below the 3.4% of the previous year.

The IMF's perspective, while still cautious, is a remarkable change from its experts' warnings in October that a global recession posed a serious threat. ​​

Adapted from WSJ, CNBC, FT, Bloomberg, Reuters

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