Investment Institute
Macroeconomics

Take Two: Surprise slowing of US inflation lifts stocks, and calls for greenwashing rules at COP27

  • 14 November 2022 (3 min read)

What do you need to know?

Markets reacted positively to US inflation data for October which showed a slower-than-expected increase. The Consumer Price Index was up 7.7% year-on-year, the lowest level since January, and excluding volatile fuel and energy unexpectedly slowed to 6.3% from 6.6%, prompting hopes that a peak had passed and that the Federal Reserve would have the scope to soften the pace and scale of rate hikes by more. An easing of COVID-19 restrictions in China also helped boost stocks; the MSCI World Index was up 6.9% in the week to Thursday’s close.1 Meanwhile the outcome of the US midterm elections remained uncertain last week, but failed to deliver an expected surge in support for the Republican Party. Overall control of the Senate could rest on a December run-off in Georgia.

Around the world

A crackdown on greenwashing was one of the pledges at the United Nations climate change conference COP27 last week. The High-Level Expert Group set up by UN Secretary-General António Guterres demanded greater scrutiny over net zero commitments, and drastic cuts in greenhouse gas emissions before 2030, rather than 2050. A separate report suggested approximately $2trn will be needed annually by 2030 to help emerging markets, other than China, to transition to net zero and contend with the devastating effects of climate change – where both domestic and external finance will be key. COP27 continues throughout this week and ends on Friday.

Figure in focus: 2.1%

China’s annual inflation fell to 2.1% in October from 2.8% the previous month, its lowest since May and below market expectations. The country has seen poor overseas and domestic demand, hampered by strict COVID-19 restrictions, alongside global cost pressures. The figure accompanied a drop in China’s Producer Price Index, a measure of factory gate prices, which fell by 1.3% compared to a year earlier - its first decline since December 2020. Meanwhile, trade data was also weaker with both imports and exports falling in October.

Words of wisdom

Marginal propensity to consume: The proportion of additional income – from wage growth, tax cuts or whatever - that is spent, rather than saved. This determines how changes in fiscal stimulus feed through to boosting the economy, but is complex as households often react differently to different types of income. Data reported last week showed Eurozone retail sales grew for the first time in four months in September, rising 0.4% from August, driven by growth in mail order and internet shopping.

What’s coming up

Monday sees India report its inflation numbers for October, while on Tuesday a second estimate for the Eurozone’s third quarter (Q3) GDP rate is published. On the same day Japan gives a preliminary estimate for its own Q3 economic growth. Canada and the UK update markets with new inflation numbers on Wednesday and on Thursday UK Chancellor Jeremy Hunt delivers his Autumn Statement. Friday sees Japan’s latest inflation numbers reported.

  • SW4gVVMgZG9sbGFyIHRlcm1zLiBTb3VyY2U6IEZhY3RTZXQsIGFzIG9mIDEwLzExLzIy

Related Articles

Macroeconomics

Take Two: Fed and Bank of England raise rates to 2008 highs, Japan intervenes in currency market

  • by AXA IM Investment Institute
  • 26 September 2022 (3 min read)
Macroeconomics

Peak in the clouds

  • by Gilles Moëc
  • 19 September 2022 (5 min read)
Macroeconomics

Take Two: US inflation data suggests aggressive Fed hike; EU plans energy response

  • by AXA IM Investment Institute
  • 19 September 2022 (5 min read)

    Disclaimer

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.

    Are you a Professional Investor ?

    This website is available in English only and directed at professional, institutional or qualified investors. It is not suitable for retail investors. As such, some of the funds, products and services described on this website are not available for retail investors under the MiFID II (Directive 2014/65/UE). By pressing accept you confirm that you are a professional investor and agree to AXA Investment Managers' Legal Information and Terms of Use.