The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
European stocks, after hitting record highs in 2024, face a challenging road ahead as fund managers from Goldman Sachs, BlackRock, and Northern Trust warn of rising risks from a weak economic outlook, uncertain corporate earnings, and the looming US presidential election.
BlackRock’s Helen Jewell cautioned that the fragile market could remain volatile, particularly with uncertainty surrounding the US election and a shaky macroeconomic backdrop in Europe, where the eurozone’s private sector has been shrinking and Germany faces a potential contraction.
Adding to the uncertainty is the upcoming third-quarter earnings season in mid-October. With consumer demand weakening, early signs suggest that earnings for some major companies, including Novo Nordisk and H&M, may disappoint. Expectations for full-year earnings have already dropped 2.8% since January, and some analysts believe further downgrades are likely.
The US election adds another layer of risk, particularly if Donald Trump wins and enacts a proposed 10% import tariff, which could spark a trade war, further pressuring European earnings in sectors like automobiles, technology, and capital goods.
While China’s recent stimulus measures offer some hope, experts like Gilles Guibout from Axa IM remain cautious, noting that the impact on European equities, particularly luxury goods and automakers, remains uncertain.
Ultimately, upcoming earnings reports will likely set the direction for Europe’s stock market, leaving investors to navigate an increasingly complex and volatile landscape.
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