The US economic data, including the services and manufacturing PMIs, exceeded expectations and indicated that the economy is in good shape. The Bank of Canada is cautious about rate cuts, while the eurozone’s data shows a weak economy that could lead to rate cuts by the ECB. Oil prices are consolidating, gold is holding above ,000, and bitcoin is testing a potential new area of resistance.
The Bank of Japan (BoJ) has decided to keep interest rates and its yield curve control policy unchanged, indicating that a decision on negative rates may come in the future. The central bank is waiting for the outcome of spring wage negotiations to determine if price pressures are filtering through to the economy in a sustainable way. The BoJ also suggested that the first rate hike won’t necessarily come alongside new economic forecasts. The yen is rapidly falling, raising the question of whether the Japanese Ministry of Finance will intervene or tolerate the currency’s movements. Oil prices remain uncertain due to factors such as the economy, interest rates, OPEC+, and the Middle East. Gold continues to trade above ,000 despite traders reducing expectations for interest rate cuts. Bitcoin has experienced a decline, falling below ,000, but the focus is on what could generate excitement and further gains in the cryptocurrency market.
The text states that the lowest annual inflation rates among EU member states were recorded in Denmark (0.4%), Italy (0.5%), and Belgium (0.5%). The text also mentions that in December 2023, the annual inflation rate in Cyprus was 1.9%, down from 2.4% in November, and significantly lower than the 7.6% recorded in December 2022. In the eurozone, the annual inflation rate in December was 2.9 %, up from 2.4% in November, and much lower than the 9.2% recorded in December 2022. In the EU as a whole, the annual inflation rate was 3.4% in December, up from 3.1% in November, and significantly lower than the 10.4% recorded a year earlier. The highest annual inflation rates were recorded in the Czech Republic (7.6%), Romania (7.0%), and Slovakia (6.6%). In comparison to November, the annual inflation rate decreased in fifteen member states, remained stable in one, and increased in eleven. In December, the services sector had the largest contribution to the annual inflation rate in the eurozone, followed by food, alcohol, and tobacco, non-energy industrial goods, and energy.
In 2023, Cyprus faced challenges in its financial system, particularly in managing non-performing loans (NPLs). While there has been a significant reduction in NPLs over the past decade, smaller banks still hold a high amount of NPLs, and Credit Acquiring Companies (CACs) manage a significant portfolio of non-performing loans. The private sector's over-indebtedness is a major vulnerability for the Cypriot economy, and addressing this issue involves reducing NPLs. Recent legislative interventions have provided additional tools for loan restructuring and resolved the issue of foreclosures. The focus now should be on effectively implementing these changes and maintaining a stable institutional framework. The European Commission and the Central Bank of Cyprus emphasize the importance of a functional foreclosure framework for managing NPLs and ensuring payment discipline. The high private debt in the non-financial sector poses additional challenges, especially for vulnerable households and businesses, given the high inflation and interest rates. However, there is currently no evidence of a new wave of defaults.
Employees in both the public and private sectors entitled to the Cost of Living Allowance (CoLA) will receive a 2.44% wage increase from this month. The increase is based on the automatic adjustment of wages in line with the consumer price index (CPI) and will be in place until the end of the year. The rate of inflation fell to 3.5% in 2023, significantly lower than the 8.4% at the end of 2022. Last January, recipients of CoLA received 50% of their entitlement, which was raised to 66.7% in the summer. The CPI declined to 1.6% in December from 1.7% in November, and the overall CPI increase for 2023 was 3.5% compared to 8.4% in 2022. Petroleum products fell in price, while the restaurants and hotels category showed a rise of 5.4%.
The ‘big five’ tech giants (Apple, Microsoft, Google-parent Alphabet, Amazon, and Facebook’s Meta) collectively added .9 trillion to their market cap in 2023, recovering all the losses they experienced in 2022. This represents the highest figure in the market’s history. The rise of AI, along with the improving economy and slowing inflation, has contributed to the tech sector’s strong performance. The Nasdaq jumped 32% in the first half of 2023, powered by Apple’s rally and Nvidia’s boom. Meta was the best performer among the big tech group, with its market cap surging by 188% year-over-year. Amazon witnessed the second-largest increase of 84%, while Microsoft and Alphabet’s market caps jumped by 55%. Apple’s stock also saw a 45% increase since December 2022.
A landmark EU law will ban the sale of goods linked to deforestation, one of the causes of climate change. Importers of coffee in the European Union are already reducing purchases from small farmers in Africa as they prepare for the law, which will come into effect in late 2024. The cost and difficulty of complying with the EU regulation on deforestation is expected to have a serious side effects that could reshape global commodity markets over time. Four companies have already stopped ordering coffee from Ethiopia, a decision that will have negative consequences for around 5 million rural families who rely on coffee cultivation. The law requires importers to prove that their raw materials do not come from deforested land or face high fines. The European Commission has launched several initiatives to help producing countries and smallholders comply with the law. However, some smallholders are struggling to collect the required data in time. The law is expected to increase food prices in the EU, but the European Commission stated that it will not lead to inflation.