The markets were boosted by growing hopes for a soft landing in the US and Eurozone economies
Britain's Sunak says fighting inflation will require discipline, Reuters
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Mercedes expects double-digit growth in India in 2023 despite weak rupee by Reuters
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Rising economic optimism boosted stock markets on both sides of the Atlantic on Friday, after euro zone inflation figures and US jobs data boosted hopes of a soft landing this year.
But economists have warned that while the recent big drop in energy prices has boosted the outlook for 2023, there is an implied inflation He will continue to pressure central banks to raise interest rates further to keep price increases in check.
"Inflation will not be able to return sustainably to target until this fundamental problem is overcome," said Philip Rush, founder of consultancy Heteronomics.
headline Euro-zone December's inflation figures, which fell back to single digits, helped European stocks post their best opening week of the year since 2009 as investors shed some of the year-end gloom.
Goldman Sachs noted that lower wholesale natural gas prices, which are down more than 75 percent from their peak in Europe, would "boost real incomes; help reduce inflation; and improve government budgets." She added that the increase in exports will come from the end of China's policy of not spreading the Corona virus.
In the United States, the S&P rose nearly 2 percent in the mid-afternoon after job growth slowed for the fifth consecutive month and hourly wages grew less than expected, providing some relief against inflationary pressures. A survey showed that activity in the broad US service sector contracted unexpectedly in December, the first drop since the coronavirus crisis in May 2020.
But US job growth was faster than expected, at 223,000 for December, while the unemployment rate fell to an all-time low, giving few indications of a downturn in US economic performance that would drive inflation down quickly.
In both the eurozone and the US, resilient economic data reinforced fears that central banks will have to continue their efforts to bring inflation down to last year's low levels, despite clear indications that price increases have peaked. Central bankers fear that inflation will remain at around 4-5 per cent rather than fall to its 2 per cent target on both sides of the Atlantic.
European data "now… [point] to a very mild recession, about to not be a recession." She added that this would encourage hawks in central banks to "worry about wages and [profit] Margins take over [from energy] as drivers of inflation."
The decline in gas and petrol prices in the euro area helped inflation in the region fall to less than expected 9.2 percent from 10.1 percent.
The decline in energy prices also boosted an indicator of economic confidence in the European Union, to just 4 percent below its long-term average.
But as prices for services and non-energy industrial goods rose faster in December, the region's core inflation rate — which excludes energy and food prices — rose to 5.2 percent, the highest rate since the single currency was created in 1999.
The European Central Bank is expected to raise interest rates by another percentage point to 3 percent at two meetings in February and March, with a peak around 3.5 percent before the summer. The US Federal Reserve is expected to raise interest rates above 5 percent and hold them there for a long time until inflationary pressures in the US subside.
In signs that the US economy is still hotter than the Fed would prefer, the jobs gain number of 223,000 for December beat economists' expectations for an increase of 200,000.
The unemployment rate unexpectedly fell to a historic low of 3.5 percent, according to official data. "This is still a very tight job market," said Veronica Clark, an economist at Citi. For an economist, the unemployment rate is low [is] Risks of rising future wages.
US Jobs Report Brings Fed's 'Soft Land' Scenario to Life By Reuters
Mexico's headline inflation expected to accelerate in December, with core index falling: Reuters poll by Reuters
© Reuters. Reuters / Henry Nichols / Paul
LONDON (Reuters) – British Prime Minister Rishi Sunak has said inflation is not guaranteed to go down this year and his government must be disciplined to ensure it does.
"You have to continue to be disciplined and take the right and responsible decisions in order to bring down inflation," Sunak said in an interview with BBC Television. "It's really important that we do that. It's not something abstract. It affects people."
© Reuters. FILE PHOTO: Capitola Wharf damaged by the storm's severe waves is seen in Santa Cruz, California, United States, on January 5, 2023, in this screenshot obtained from a social media video. Kelly Pound/via Reuters
(Reuters) – Heavy rains and damaging winds knocked out power to hundreds of thousands of homes and businesses in California late Sunday as the region prepared for the next onslaught of severe weather.
More than 330,000 homes and businesses were reported to still be without power in California as of 3:08 a.m. EDT (8:08 GMT) Sunday night, according to data from PowerOutage.us.
At least six people have died in the bad weather since New Year's weekend, including a child who was killed by a falling redwood tree and crushing a mobile home in Northern California.
Meanwhile, meteorologists have warned that another "atmospheric river" of thick, moist tropical air will hit California on Monday with mountain rain and snow.
An NWS weather warning Saturday warned that the cumulative effect of back-to-back heavy rain storms since late December could cause rivers to rise to record levels and cause flooding across much of central California.
© Reuters. FILE PHOTO: Various models of Mercedes-Benz cars are parked at the company's car assembly plant in Chakan, outside Pune, India June 11, 2015. REUTERS/Danish Siddiqui/File Photo
Written by Aditi Shah
NEW DELHI (Reuters) – Mercedes-Benz expects double-digit sales growth in India this year, the head of its domestic unit Mercedes-Benz said in an interview, despite concerns that a weak rupee could push up car prices.
The German luxury automaker's sales in India rose 41% last year to 15,822 vehicles, an all-time high in the country, and it has a backlog of orders of around 6,000, Santosh Iyer, managing director of Mercedes-Benz India, told Reuters.
He said that one of the risks to the growth of the luxury car market in India is the weakness of the Indian currency, which could force Mercedes to increase domestic prices as the prices of imported components rise.
The rupee fell 10% against the dollar in 2022, its biggest decline since 2013, making it one of the worst-performing Asian currencies.
"One of the biggest risks we see for us is the exchange rate. With the rupee weakening a bit more, that will lead us to more price increases. And that's some of the headwinds that we see when it comes to growth potential," Iyer said.
"But we are starting the year with a very healthy order bank and that gives us confidence of double-digit growth even in 2023," Iyer said.
Mercedes plans to launch 10 new cars in India in 2023, most of which cost more than 10 million rupees (US$120,000), the high-end segment which grew by 69% in 2022. The new launches will include petrol cars, electric cars and plug-in electrics. – in hybrids.
The company launched three electric cars in India in 2022 including a locally assembled electric model of the S-class sedan. Electric cars have seen strong demand, with Indian customers waiting four to six months after reserving their cars. Iyer wants to reduce this to two to three months before more EVs are launched.
Electric vehicle market in India is gaining momentum – Renault Reuters reported on Friday that (EPA:) is considering building a mass-market electric vehicle domestically, in a renewed push to a market where sales of these vehicles are expected to grow rapidly from a small base.
local automaker Tata Motors (NYSE::) and foreign players like Stellantis and Hyundai Motor have also launched EVs.
Ayer said Mercedes has seen a decrease in global semiconductor shortages, but it still faces some disruptions due to spare parts shortages and shipment delays due to geopolitical issues, the energy crisis in Europe and pandemic-related lockdowns in various parts of the world.
He predicted that it would take 12 to 18 months for the situation to return to normal.
($1 = 82.5410 Indian rupees)
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