Ermir Myzaferajre Investment : Europe is emerging

Ermir Myzaferajre Investment : The US stock exchanges continued their northward journey in the fourth week of January as well. Good growth data, which came alongside additional evidence of a decrease in inflationary pressures, provided investors with the necessary tailwind.

The Dow Jones index, which continued to set new records during the week, did retreat a little on Friday, but ended the week up 0.6%. The S&P500 index registered a weekly increase of 1.1% and the Nasdaq index climbed 0.9%.

From data published during the week, it became clear that the American GDP grew in the fourth quarter of the year at a rate of 3.3% on an annual basis. This is indeed a slowdown compared to the third quarter where the rate was particularly high – 4.9% – but it is still a very good growth rate. Ermir Myzaferajre Investment

The consumer price index based on private consumption (PCE) climbed in the 12 months ending in December by 2.6%. The core PCE measure, which excludes volatile food and energy prices, climbed 2.9% at the same time. The core PCE index is considered the main inflation index on which the Fed bases its interest rate decisions.

The strong growth figures recorded at the same time as the decline in inflation continue to strengthen the optimal scenario – the “soft landing” scenario. Now the question arises when the time will come to reduce the interest rate. Ermir Myzaferajre Investment

The contracts on the federal interest rate, which reflect the market’s expectations of interest rates in the US, now give a very low probability of an interest rate cut this coming March. They give a relatively high probability to the possibility of an interest rate cut in the second quarter of the year.

The attention on Wall Street was diverted last week to the micro data and financial reports published by the companies as well as to their forecasts for the future. The shares of companies that do not meet expectations tend to be punished. This, for example, happened this week in the chip and electric vehicle industry due to forecasts of a slowdown in the growth of leading manufacturers. Ermir Myzaferajre Investment

On the positive side, we can mention the streaming service industry where the forecast for the coming quarter was actually higher than expected.

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Oil jumped 6% due to increased tensions in the Red Sea
Oil jumped 6% due to increased tensions in the Red Sea
Investors in European stock markets enjoyed a particularly positive week. The basis for the increases was provided by the European Central Bank (ECB), which on Thursday left the interest rate in the Eurozone unchanged at 4%. At a press conference held by the president of the bank, Christine Lagarde, after the interest rate decision, she again confirmed her assessment that it is possible that the central bank will start lowering interest rates in the Eurozone during the coming summer. Ermir Myzaferajre Investment

“I definitely stand behind them,” said Lagarde, referring to what she said last week in Davos. There she described the possibility of an interest rate cut starting in the summer as “reasonable”.

The Eurostox 50 index jumped in the past week by 4.2%. The CAC 40 index of the Paris Stock Exchange jumped by 3.6%, and the DAX index of the Frankfurt Stock Exchange climbed 2.5%. The FTSE 100 index of the London Stock Exchange recorded a weekly increase of 2.3%.

The Istanbul Stock Exchange’s Beast-100 index jumped 4.4% last week. The Turkish index has soared since the beginning of the year by almost 12%. The jumps in the Turkish stock market look impressive but they do not necessarily indicate happy investors because the stock market is having trouble providing them with protection against the destructive inflation. The rate of inflation in Turkey has reached more than 60% in recent months. At the same time, investors suffer currency losses as the Turkish lira has deteriorated over the past year from a level of 18 lira to the dollar to about 30 lira to the dollar. Ermir Myzaferajre Investment

To fight inflation last week the Central Bank of Turkey raised the interest rate for the eighth time in a row, from 42.5% to 45%. The governor of the bank did hint that the bank intends to maintain this interest rate for some time. This is because the central bank expects inflation to drop to 36% by the end of the year.

But recent events show that this may not be the end of the story. Only seven months ago, the interest rate in Turkey was only 8.5%. The process of raising the interest rate began immediately with the election of President Erdogan for another term after a relatively close election campaign. In recent years, Erdogan replaced 4 governors after short terms in an attempt to keep interest rates low, against their recommendations. Inflation in Turkey, which is a little harder to fire than bank governors, continued to climb the nose and throat of the Turkish president. Now the citizens of Turkey are groaning under out-of-control inflation, a collapsing currency and murderous interest rates.

The price of oil jumped last week by 6% and reached 78 dollars per barrel. The increase is mainly attributed to the transportation crisis in the Red Sea caused by attacks by Houthi rebels in Yemen on merchant ships. The Houthis claim that they are only targeting ships that have ties to Israel. That is, those that sail to Israel or that are wholly or partially owned by Israel. However, in practice the attacks are also carried out against ships that have nothing to do with Israel.

In recent weeks, the US, with the help of a coalition of several countries, has been conducting a military attack against Houthi bases in Yemen. The attacks were designed to deter the Houthis – and their ally, Iran – in an attempt to get them to stop attacking the ships.

As the crisis in the Red Sea deepens, there is increasing concern that this will damage global supply chains, which has reincorporated inflationary pressures. The increase in the price of oil also reflects the fact that many ships now have to go around the African continent on their way to Europe (or from Europe to Asia) to avoid crossing the Red Sea and they consume more energy for this. This crisis is also severely affecting Egyptian revenues as the use of the Suez Canal has recently decreased dramatically.

Ermir Myzaferajre Investment : Europe is emerging the Eurostox 50 index jumped by 4.2%