The Australian and German indexes set all-time highs. The Reserve Bank of South Africa kept the rate at 8.25%

More ECB policymakers are hinting at a rate cut in June. Yesterday, ECB Governing Council representative Kazaks said inflation will continue to fall across the Eurozone, and June could be a good time for the ECB to start lowering borrowing costs. His colleague, ECB executive board representative Cipollone, added that if incoming data confirms the scenario envisioned in the March forecasts, the ECB should be ready to roll back its restrictive monetary policy stance quickly. Currently, swaps are pricing in the odds of a 25 bps ECB rate cut to 13% at the next meeting on April 11 and fully pricing in that rate cut (100%) at the next meeting on June 6.

German retail sales in February 2024 fell by 1.9% month-on-month, falling short of market forecasts that expected a 0.3% increase. This was the fourth consecutive month of decline in retail sales and the sharpest pace since October 2022, reflecting the impact of higher inflation and high borrowing costs.

The UK economy contracted by 0.3% in the final quarter of 2023, entering a technical recession as high inflation, record borrowing costs, and weak external demand put pressure on demand and activity.

WTI crude futures rose to $82 a barrel on Thursday, breaking a two-day decline, as the latest EIA report pointed to a smaller weekly increase in US crude inventories compared to API data. The EIA data showed that US crude inventories rose by 3.165 million barrels last week, beating market expectations for a 1.275 million barrel decline but far less than the 9.337 million barrel increase reported by the API. Investors also highlighted ongoing supply concerns before next week’s OPEC Joint Ministerial Monitoring Committee meeting.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.90%, China’s FTSE China A50 (CHA50) declined by 0.76%, Hong Kong’s Hang Seng (HK50) lost 1.36% yesterday, while Australia’s ASX 200 (AU200) was positive 0.51%. At the market open on Thursday, Chinese indices bounced off one-month lows amid expectations that Chinese authorities will step up policy support to shore up the economy. On Thursday, Chinese lawmaker Zhao Leji said that the country would continue to open its economy to foreign investors, which boosted market sentiment. Investors are awaiting data on manufacturing and services activity in China in the coming days to gauge the health of the world’s second-largest economy. Meanwhile, Chinese President Xi Jinping met with US business leaders in Beijing on Wednesday as the government seeks to return foreign investors to the country.

The Reserve Bank of South Africa unanimously decided to keep the key repo rate at 8.25%, marking the fifth consecutive meeting at 2009 levels, as expected. Policymakers emphasized that risks to the inflation outlook were generally skewed to the upside. Core inflation accelerated for the second consecutive month, reaching 5.6% in February from January’s 5.3%, nearing the upper end of the central bank’s target range of 3-6%. Inflation is not expected to reach the middle of the target range until the end of 2025, later than previously thought, as it was initially expected to do so by mid-year.

Expectations for Australian consumer inflation fell to 4.3% in March 2024 from 4.5% in February, indicating the lowest level since October 2021 amid signs that domestic price pressures continue to ease. Australian retail sales rose by 0.3% month-on-month in February 2024, slowing sharply from a 1.1% increase in the previous month and below market forecasts of 0.4%. The S&P/ASX 200 Index (AU200) closed at 7,897 on Thursday, hitting new record highs. Mining stocks led the gains amid higher gold, iron ore, and lithium prices. The interest rate-sensitive banking, real estate, and retail sectors also rose as softer-than-expected domestic inflation data bolstered bets for a rate cut in the second half of 2024.