ECB targets inflation at 2.3% in 2024
Christine Lagarde, the president of the ECB, claims they will raise interest rates further to fight inflation. The ECB targets 5.5% inflation in 2023 and 2.3% inflation in 2024. And thus, it is expected that risk-on assets could suffer as a result in the upcoming months.
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Inflation in Euro Area reaches a record high of 10%. Inflation increased to 17.2% in Poland, the highest level in 26 years and far more than the 16.5% market expectation. Portugal’s annual inflation rate grew to 9.3%, the highest level since October 1992. Italian inflation rose to 8.9%, the highest in nearly 37 years.
Following a quarterly decline of 1.6% in Q1, the US economy shrank by an annualized 0.6% in Q2 2022. This matches the second estimate and proves the US had, in fact, entered a recession. US stock indices continue to dive lower.
China continued its lockdowns that appeared to hurt its economy as the rest of the world said goodbye to COVID. The nation’s real estate market and stock market suffered as a result. Currently, the government has directed state banks to buy equities to stop excessive selling.
Rate hikes from all central banks worldwide are pushing markets lower. In the last week, DAX 40 fell by 4%, S&P 500 by 6%, and Dow Jones by 5%. Commodities followed, with WTI Crude Oil down 8% and natural gas down 11% for the week.
The Bank of England joined Federal Reserve and raised interest rates as expected by 50 bps to fight high inflation. This marks the 7th consecutive rate hike, pushing borrowing costs to the highest since 2008.
The Federal Reserve increased its federal funds rate by 0.75% to 3.25%, intensifying its fight against inflation. US markets staged another late-day reversal, giving up their gains. With the Fed’s most recent increase, the short-term benchmark rate is at its highest since 2008.
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The Brazilian real increased by 4% versus the dollar, trading at about $5.2. BRL strenghtens as investors cheered an unexpectedly close outcome in the first round of the presidential elections. After no candidate receives a majority of more than 50% of the vote, the contest will proceed to a runoff scheduled for October 30.
Silver futures are up 8% and hit $20.3 per ounce on the first trading day of Q4 of 2022. Silver is up by almost 15% in just one week.
Tesla trades at $246, down 7% in a single day. Looking back, the stock dropped 10.51% over the last four weeks and is down 40% from its all-time high.
Gas prices in Europe are down 9% for the day at €171, far lower than the record highs of €340 in August. Europe managed to replace certain Russian supplies with LNG imports and was able to refill its storage facilities ahead of winter. The amount of gas reserves across Europe is currently at about 87%.
On the first trading day of Q4, the British pound climbed up near $1.12, returning to levels not seen in nearly two weeks. GBP rose right after the finance minister Kwarteng said he would not cut the top 45% income tax rate for the largest earners.
UK natural gas reached their highest level in two weeks on Friday, rising by almost 50% to 380. The surge was fueled by increased demand from gas-fired power facilities as a result of slower wind speeds. As of September 28th, gas storage facilities in the UK were 94.65% full.