On Wall Street, the indices recovered yesterday from the previous losses. After an initially weak start, the Dow Jones Industrial closed about one percent higher and the S&P 500 gained +0.8%. On the Nasdaq technology exchange, the indices gained about +1.2%. Nevertheless, the tech indices lost, in view of the upcoming first interest rate tightening by the Fed, about -15% since the beginning of the year.
After expectations of an interest rate turnaround in the euro area gained weight on financial markets after the European Central Bank's (ECB) last monetary policy assessment a week ago, central bank chief Christine Lagarde put the matter into perspective, pointing to the geopolitical risks to Europe's economic development. An exit from loose monetary policy would also have to be gradual, Lagarde said at her hearing before the European Parliament. Nevertheless, Lagarde no longer wants to rule out initial interest rate steps this year in view of rising inflationary pressure. She said that the ECB will closely analyze the latest growth and inflation projections when it makes its next monetary policy decision in March. However, Lagarde stressed that there was currently no reason to jump to conclusions. Probably echoing the famous quote of her predecessor Mario Draghi – “whatever it takes” – the ECB chairwoman said that the ECB would show the necessary determination to ensure price stability. That commitment, she said, remains “absolutely unwavering.”
In the United States, the foreign trade deficit widened to a new record high in 2021. The deficit increased by almost +27% to USD 859.1 billion. Both imports (+20.5%) and exports (+18.5%) rose sharply. With China, Americans' 2021 deficit was USD 355.3 billion, up +14.5% and the highest level since a record 2018. For December, the United States reported an overall trade deficit of USD 80.7 billion, which was less than economists expected at USD 83.0 billion.
The US House of Representatives gave the green light to a stopgap budget to prevent the government once again from running out of money as early as the end of next week. In the large chamber, the bill, which secures funding until March 11, was approved by a majority of 272 to 162 votes. Now the Senate must also approve it before President Joe Biden can sign it. Failure to pass a stopgap budget could result in a shutdown, or a partial shutdown of government operations.
|08:00||GE||Trade Balance (December)||EUR +10.9bn|
|10:00||IT||Industrial Production (December, m/m)||+1.9%|
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Source: LGT Bank (Switzerland) Ltd.
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