2023-03-03 Markets
The mood of equity investors turned positive with indications that growth is resilient in the US, improving in Europe and accelerating in China. Bonds, on the other hand, were negatively affected by inflation reports which likely imply a more sustained tightening of monetary policies (Note: this applies to nominal bonds; inflation linkers showed positive returns for the week).
A relatively rare (not unprecedented, please!) event also took place: for the first time in quite some years, inflation expectations (derived by comparing nominal and real long-term interest rates; see graph above) were higher in the Eurozone than in the US. This is odd given what we know about the growth patterns in the two areas, but it is consistent with differences in the respective labor markets: it could be implying that wage pressures will be more of a problem here than across the Atlantic.
[Cover: Morgan Stanley Research]
A relatively rare (not unprecedented, please!) event also took place: for the first time in quite some years, inflation expectations (derived by comparing nominal and real long-term interest rates; see graph above) were higher in the Eurozone than in the US. This is odd given what we know about the growth patterns in the two areas, but it is consistent with differences in the respective labor markets: it could be implying that wage pressures will be more of a problem here than across the Atlantic.
[Cover: Morgan Stanley Research]
