Investment Institute
Weekly Market Update

Take Two: Difficult backdrop may hinder Eurozone deflation; China aims for greater foreign investment

  • 02 April 2024 (3 min read)

What do you need to know? 

Record high wages against a backdrop of sluggish productivity are limiting the scope for Eurozone disinflation, ratings agency S&P Global said. It revised its 2025 GDP growth forecast for the bloc down to 1.3% from 1.5% and increased its inflation forecast to 2.1% from 2.0% for the year. It also now expects modest 2024 GDP growth in the region of 0.7%, compared with 0.8% in its previous forecast. It said the European economy remains on track for activity to improve but that slow implementation of the Next Generation EU recovery package could mean a weaker rebound than expected. AXA IM currently forecasts a lower 0.3% GDP growth for 2024.


Around the world

To attract greater investment, overseas companies investing in China will be treated the same as domestic ones, according to officials at the annual China Development Forum in Beijing. Premier Li Qiang told an audience of international business leaders that “an increasingly open China will definitely bring more opportunities” for global co-operation, as he presented plans to support economic growth. At the event, International Monetary Fund (IMF) Managing Director Kristalina Georgieva suggested China faces a “fork in the road” as it decides between continuing with its past economic policies or introducing reforms to boost growth.

Figure in focus: $6bn

The US announced some $6bn in funding to help decarbonise energy-intensive industries and reduce industrial greenhouse gas emissions. The money is set to subsidise 33 projects across more than 20 states. According to the government, the initiative represents the US’s largest ever investment in industrial decarbonisation. It added that together the projects are expected to reduce the equivalent of more than 14 million metric tons of carbon dioxide emissions each year which is equivalent to the annual emissions of three million gasoline-powered cars. In the US, the industrial sector contributes nearly one-third of the nation’s overall greenhouse gas emissions.


Words of wisdom

Gaia AI: An experimental artificial intelligence application which central banks are using to search and extract company data on carbon emissions, green bond issuance and voluntary net-zero commitments. A collaboration between the Bank for International Settlements (BIS) and the European Central Bank alongside Spain and Germany’s central banks, Gaia aims to give greater transparency as it can overcome differences between jurisdictional definitions and disclosure frameworks, in the absence of a single reporting standard. It can analyse a range of data from many organisations, allowing climate risk analysis “at a scale that was previously unimaginable”, the BIS said.

What’s coming up?

Tuesday sees the minutes from the latest Reserve Bank of Australia policy meeting published. On Wednesday, the Eurozone issues flash inflation figures for March as well as February’s unemployment rate. Wednesday also sees final composite Purchasing Managers’ Indices (PMIs) from Japan, China, the US and Canada, while the Eurozone and UK report final PMIs on Thursday. The Reserve Bank of India meets to decide on interest rates on Friday while the US and Canada publish employment data. The IMF is expected to publish its latest World Economic Outlook on Friday.

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