Sentiment on US and European government bonds remained positive, with respective bond yields falling to new lows amid heightened expectations of a slowdown in Fed and ECB rate hikes in the coming months. The latest data from the Eurozone and the US on inflation indicate an easing of pressure, although they remain at levels well above what is considered consistent with the corresponding target of central banks. In addition, some of the most important US economic data released in recent days has been weaker than expected, raising fears of a possible recession in the world’s largest economy, while putting more pressure on the dollar, pushing the euro/dollar higher. . above 1.05 for the first time since the end of June.
The U.S. ISM industrial activity index fell 1.2 points in November to 49, below the critical level of 50, marking the first contraction since May 2020. This development is in line with the Chicago PMI, with the PMI falling even further in November to levels in line with recession levels, as well as the November PMI released last week (falling to 47.7 from 50.4 in October). At the same time, following weaker-than-expected US inflation data for October released early last month, investor optimism that the peak of the inflationary wave could be passed was further underpinned by a larger-than-expected decline rates. personal consumption expenditures (PCP) in October (6.0% and 5.0% y/y, respectively, from 6.3% and 5.2% in September).
As Fed chief Jerome Powell stressed that the central bank may scale down its rate hike in December (after four consecutive hikes of 75 basis points each), the futures market has reassessed its expectations for US interest rate performance. The federal funds rate ceiling is now expected to be below 5% in 2023, while the overall projected rate cut in the second half of the year has risen to around 40 basis points. Market estimate for 50bp upside is also confirmed. at interest rates from the ECB at the next meeting, 15 December.
* Department of financial analysis and research of international capital markets of Eurobank.
Source: Kathimerini
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