Stock markets are all in the red after a turning point in the session, driven lower by the prospects that the expected interest rate cut by the Fed, previously taken for granted until a few weeks ago, may be further away than anticipated. Milan is currently experiencing one of the two worst trading sessions of the year, with a 1.4% decline, in line with Paris and Frankfurt, but slightly less severe than London. There has been a slight recovery following the opening in slightly positive territory on Wall Street.
Data on the US job market, better than expected, has come from the United States. This is good news for the economy, but could still indicate to the Fed that with inflation slowly rising and the job market remaining strong, the current level of interest rates should not be adjusted. The Bank of Italy has revised downwards its inflation estimates, projecting a significant decrease to 1.3% in 2024 (compared to 1.9% forecasted in December). Bankitalia states that the sharp decrease in inflation this year would mainly reflect the negative impact of intermediate goods prices and energy costs.
At Piazza Affari, only a few stocks are trading above parity, with Eni trading up 1%. The company will propose a widespread employee share ownership plan at the shareholders’ meeting on May 15th. All banks are performing poorly, with Stellantis down 2% after Maserati announced a plan for 173 voluntary incentivized staff exits. The negative market sentiment is exacerbated by uncertainty surrounding the potential interest rate cuts by the Fed, creating volatility in stock prices.
Investors are closely watching the Fed’s next moves, as the uncertain timing of the anticipated interest rate cut is contributing to market jitters. While positive economic data from the US job market is encouraging, it adds to the complexity of the decision-making process for the Fed. The Bank of Italy’s downward revision of inflation forecasts further adds to the uncertainty in the market, as investors try to assess the potential impact on their investment portfolios.
Overall, the stock market is experiencing a period of volatility and caution as investors navigate the uncertain economic environment. The combination of fluctuating market conditions, potential interest rate cuts by the Fed, and changing inflation forecasts from central banks is creating challenges for investors. It will be important for market participants to closely monitor economic data and central bank announcements to make informed decisions in the current market climate. As global economic conditions continue to evolve, market participants will need to stay vigilant and adaptable in order to navigate the changing landscape effectively.
