The Day at a Glance | April 1 2022

The Top

*Inflation in Europe accelerated to a 7.5% annual rate in March; markets expect interest rates to increase in 50bp in Europe this year.

*431 thousand jobs were created in the U.S. in March; wages increased at their fastest pace since May of 2020 (5.6% annual).

*U.S. will form team in Mexico for energy reform.

*Real-estate sales in China decreased 53% annual in March, sign of persistent deterioration in the sector.

Economic environment

Inflation in Europe reached a new record high. Consumer prices once again surprised to the upside in Europe as they recorded a 7.5% rate of growth in March (vs 6.7%e.). The increase reflects a strong impact on prices caused by the conflict in Ukraine after inflation increased from 5.9% in February. Energy (44% annual) and food (5%) explain most of the increase in prices, but services (2.7%) and industrial goods (3.4%) also logged an increase as the underlying index reached record levels (3%). The most concerning increase was seen in Spain and Germany, and markets have started to take into account more decisive actions on behalf of the European Central Bank in order to contain inflation. A 50 bp increase in interest rates is expected to occur in 2022. President of the central bank in Germany, Joachim Nagel, urged the ECB to act in light of inflation and carry out timely measures. Luis de Guindos, Vice-President of the ECB, expects inflation to peak in April or May; even though the environment is characterized by uncertainty given the persistent conflict in Ukraine – as well as an increase in raw material prices.

Solid U.S. labor market. 431 thousand jobs were created in the U.S. economy in March; a figure that set below estimates (490 thousand) but was paired with an upwards revision to February`s figure (+72 thousand to 750 thousand), which suggests that the labor market`s recovery remained strong at the end of the 1Q22. One fourth of the increase came from leisure and hospitality, as important gains were also logged in professional services, retail sales, education and health services. The rate of unemployment fell to 3.6%, and the participation rate climbed to 62.4%. Wages, for their part, increased to a 5.6% annual rate (0.4% monthly), their highest level since May of 2020. Wages are still increasing below inflation and it`s feared that this may turn into something that will hinder consumption. Overall, Americans seem to show strong intentions of returning to the labor market and full employment circumstances maintain expectations that the FED will continue focusing on containing inflation. The federal funds rate is expected to increase in 50bp in May.