October 1, 2022

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Recession signals should not be dismissed - E24

Recession signals should not be dismissed – E24

Inflation figures from the US top the list of the week’s most important figures. Experts are also excited about Norges Bank’s regional network, which measures the temperature of the Norwegian economy.

Sarah Midtgaard, chief economist at Handelsbanken, expects Norges Bank’s temperature measurement to show a continued slowdown in business growth here at home.
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The massive price increase in the US has gotten a lot of attention over the past six months or so, and has helped shape turbulent global markets.

On Tuesday, the US inflation rate for August will be released. Sarah Midtgaard, chief economist at Handelsbanken, and Eric Bruce, chief strategist at Nordea Wealth Management, highlight this key figure as the most important globally in the coming week.

The stock market’s biggest hope is that inflation will fall. It gives consumers better purchasing power and helps alleviate interest rate concerns, Bruce says.

Up front, economists expect US price growth to continue to 8% in August from the same period last year, according to figures obtained by Bloomberg. This is after inflation abruptly eased to 8.5 percent in July.

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Consider core inflation

Bruce points out that the US central bank, the Federal Reserve, will mostly look at core inflation. Core inflation ignores food and energy prices and is expected to rise to 6.1 percent, according to figures obtained by Bloomberg.

The Fed doesn’t want to party too early, you want to see a clear drop in inflation and core inflation before you can say you’re on the right track, says Midtgaard of Handelsbanken.

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In a week and a half, the central bank will once again set US interest rates. Market price in one The Fed’s new rate hike by 0.75 percentage points with a probability of more than 90 percent At the next meeting, which will be the third consecutive price increase.

– It probably also comes from a hard-line rhetoric from Powell, confirms Midgard.

US Federal Reserve Chairman Jerome Powell spoke on Thursday and said the central bank will continue to raise interest rates until inflation is brought under control.

Triple augmentation is about to come anyway. Powell seemed clear, and then knew that the inflation number was about to happen. Obviously, if inflation surprises to the downside, it could affect the picture in the long run, but not at the next meeting, says Bruce.

At the same time, there is a tight job market and low unemployment rates in the US, which will also play a role in the future, both Bruce and Midgard point out.

“I think the focus will shift toward labor market numbers and growth numbers,” says Bruce.

Eric Bruce is chief strategist at Nordea Wealth Management.

Regional network: – should not rule out signs of stagnation

In this country, Bruce and Midtgaard singled out the Norges Bank Regional Network report on Tuesday as the most important thing to watch for the next week.

Among other things, the survey looks at how companies in the central bank’s network experience future prospects, capacity use and the job market.

We expect corporate growth here at home to continue to slow, and one shouldn’t rule out signs of stagnation, says Midgard.

The report is clearly going to be crucial, says Eric Bruce of Nordea.

– Now there is high inflation and a tight labor market, the Norges Bank was where the other central banks were and they reacted instinctively. Maybe we’re getting close to the time when you can calm down and see, says Bruce.

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Norges Bank’s regional network measures the temperature of the Norwegian economy before setting the key rate again on Thursday in a week and a half. In connection with this interest rate meeting, there will also be new expectations for economic development and the path of the interest rate.

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Midtgaard says they still believe in the new 0.5 percentage point rate hike, and believe the rate path presented on Thursday, September 22nd will be exciting.

The market is pricing in Norges Bank interest rates peaking at 3.5 percent next summer, so it could be seen as very pessimistic if the rate falls below that, says the chief economist.

Energy crisis and Chinese main characters

Beyond inflation figures and the regional grid, Bruce of Nordea is excited about something that doesn’t appear directly on the calendar.

It’s about the measures European politicians come up with to counter the rise in gas and electricity prices. He points out that they are of great importance to many markets and players.

– There are continuous leaks about the measures that will be implemented regarding the energy crisis. As usual, things are going slowly in the EU system, and exactly when it will arrive is uncertain. Bruce says it will be important.

Read on E24 +

Weak China can affect stock markets for years

It also highlights key numbers coming out of China on Friday, which include retail trade and industrial production.

– It is also worth paying attention, even if he went up and agreed that he is weak. The chief strategist says the market is largely considered weak.

Bruce points out that the country is characterized by a lockdown due to Corona, and describes the situation for the Chinese economy as a double-edged sword.

It is not good that things are going badly in China. At the same time, the chief strategist concludes that lower oil prices are linked to the outlook in China.