US stocks have been weighed down by a persistently upbeat economy and dovish rhetoric from the Federal Reserve.
Unemployment is at its lowest level in 53 years: a recovery in consumer spending despite high prices. The producer price index rose to the highest in eight months. The economy is very strong, which means inflation remains high and sticky.
Chinese financial news outlet Caixin reported that Kong Lin, the former head of the bank’s subsidiary, is under investigation.
Tesla recalls 362,759 vehicles equipped with experimental driver assistance software. The company warned that the program, known as Full Self-Driving Beta, could cause cars to crash.
For a while, it seemed that markets could live with that, and even accept it as the new normal, where economic growth could exist comfortably with inflation above 2.4%. With each higher-than-expected inflation report, markets rallied.
The markets finally fell. The Dow Jones Industrial Average fell 1.27%, the S&P 500 lost 1.39% and the Nasdaq Composite fell 1.79%. Not surprisingly, the market took a breather as hopes of a dovish Fed were soon dashed.
In fact, it’s not just that the Fed’s doves may be flying. That’s where the hawks come in. Markets were widely speculating and pricing in a 25 basis point interest rate hike for the next two Fed meetings.
What about Europe and UK?
In the EU and UK, falling global energy costs are likely to bring inflation down later this year. The region avoided power shortages by having enough reserves, not needing as much power, and having mild weather this winter.
This week, the European Commission cut its inflation outlook. He now forecasts inflation to be 5.7% this year and 2.6% in 2024 in the 20 countries that use the euro.
Electricity prices are higher than usual, making things difficult for homes and businesses. This will last a while. And the International Energy Agency has warned that if demand doesn’t fall further, Europe will face power shortages this year. It could drive prices up again.
Food prices are rising rapidly, especially as wages cannot keep up with rising costs. In the United States, grocery prices increased by 11.33% over the past year, while in the United Kingdom, food and soft drink prices increased by 16.74%. YoY in January.
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