First positive economic surprises in the eurozone since May 2023

The bi-weekly Monitor gives you a structured overview of the current capital market environment and highlights important developments.

Current market commentary

With the continuing good results from the reporting season, the fiscal support and the robust economic data, the probability of a hard landing for the (US) economy has fallen further and that of a very soft landing or no landing has risen. As a result, more and more market observers are asking themselves whether the four interest rate cuts by the Fed in 2024 that have been priced in are still too much. In the minutes of their January meeting, which have now been published, the members of the Federal Open Market Committee expressed concerns about inflation remaining too high. As a result, the first market participants are now even expecting interest rate hikes in the US. We believe this is very unlikely, partly because US elections are due this year and the interest burden in the US budget is already high. However, we assume that the market will ultimately demand a premium for holding government bonds with longer maturities. This should lead to a steeper US yield curve over time.

Short-term outlook

The next two weeks will be interesting, especially in politics. Super Tuesday, the presidential primary election day, will take place in the US on 5 March. The finance ministers and central banks of the G20 will also meet in Brazil on 28 and 29 February. At the same time, the Ministerial Conference of the World Trade Organisation will meet in Abu Dhabi. On Tuesday, the US consumer confidence index and new orders for durable goods (Jan.) will be announced. US GDP for Q4 (Feb.) will follow on Wednesday. On Thursday, the change in unemployment and the unemployment rate will be published for Germany. For the US, personal spending & income (Feb) and initial jobless claims (24 Feb) are due. The Purchasing Managers' Indices for China and the US (Feb.) and inflation data in the eurozone (Feb.) will follow on Friday.

First positive economic surprises in the eurozone since May 2023

Source: Bloomberg, Time period: 01/01/2023 – 23/02/2024
  • In February, the economic surprise index in the eurozone turned positive. The February PMI composite index, for example, reached an eight-month high of 48.9, led by the services sector and despite weakness in manufacturing.
  • The prospect of an economic recovery on both sides of the Atlantic and the robust reporting season are providing a tailwind for equities and have so far dominated the burdens from the risk of sticky inflation, rising bond yields and the declining expectations of interest rate cuts since the start of the year