In March, there was anticipation for the inflation data in the United States. The numbers turned out to be disappointing, as the general index rose to +3.5%, up from +3.2% in February. This increase was higher than expected, while the core inflation, which excludes energy and food, remained stable. This news negatively impacted the markets, with Wall Street opening in decline, Dow Jones down by 1.19%, and Nasdaq and S&P500 down by 1%. Bond yields also reacted strongly, with the American ten-year bond rising 15 basis points to 4.51%, reaching the highest levels since November. This was due to the decreased likelihood of a rate cut by the Federal Reserve in June, according to the FedWatchTool of the CME Group.
In Europe, there was a slight increase in government bond yields, with the Italian ten-year BTP rising by 5 basis points to 3.77%, while the spread with the German Bund remained stable. European stock markets initially declined after the US inflation data but later recovered, with the FTSE Mib in Milan showing a 0.02% increase at 4:15 pm. Additionally, it was announced that the credit rating outlook of China was downgraded to negative by Fitch. While Fitch did not lower the credit rating, it indicated the possibility of a future downgrade. The stock markets in the region closed mixed, with Shanghai down by 0.70%, Shenzhen down by 1.70%, and Hong Kong rising by 1.85%.
The reaction to the disappointing US inflation data was felt globally, with markets responding to the potential implications for monetary policy. The increased inflation rate raised concerns about the Federal Reserve’s stance on interest rates, with the decreased possibility of a rate cut in the near future. While the reaction was more pronounced in the US, European markets also experienced volatility, with bond yields and stock prices fluctuating in response to the news. The market uncertainty was further compounded by Fitch’s negative outlook on China’s credit rating, adding to investor unease.
The shift in market sentiment following the US inflation data highlighted the interconnectedness of global markets and the impact of economic indicators on investor behavior. The market reaction demonstrated the sensitivity to changes in inflation data and central bank policy, with investors closely monitoring developments that could affect monetary policy decisions. The mixed performance of stock markets in Europe and Asia reflected the uncertainty and volatility caused by the US inflation data and Fitch’s update on China’s credit rating outlook. As markets continue to react to economic data and geopolitical developments, investors are bracing for potential shifts in monetary policy and market dynamics.
Overall, the disappointing US inflation data and Fitch’s negative outlook on China’s credit rating contributed to market volatility and uncertainty. The reaction was felt globally, with stock markets in Europe and Asia responding to the news. Investors are closely watching for any further developments that could impact monetary policy decisions and market conditions. The interconnectedness of global markets underscores the importance of monitoring economic indicators and geopolitical events that could influence investor sentiment and market performance. As markets continue to navigate uncertainty, investors are assessing risks and opportunities in a rapidly changing economic environment.
