Even the U.K. FTSE 100 index is seemingly ready to share this common fate, as it continued to climb down despite the recent set of economic data stating that the British economy narrowly escaped a technical recession during the Christmas quarter. Recession is usually defined as two successive quarters of contraction of the Gross Domestic Product (GDP). However, a zero growth for the last three months of 2022, following a 0.3% decrease in the country's GDP from July to September, only managed to provide cold comfort for the business environment.
The National Institute of Economic and Social Research (NIESR) said the UK "will avoid a recession this year, but it won't stop it feeling like one" for households struggling with the cost of living. One in four or 7 million, families in the U.K., would not earn enough to cover all their planned energy and food bills over the coming year as inflation continues to bite. It also admitted to the possibility that middle-income households may face a hit of up to £4,000, or around 13%, to their personal income. More government subsidies could cushion the blow for households, but even a tax cut would not immediately solve the problems surrounding productivity and investment, as well as labour shortages. It is worth noting that rather similar concerns about the sufficiency of economic incentives make all European nations excited.
It is quite clear that equities in Europe will not continue to rebound if the U.S. major indices fall. The S&P 500 broad market barometer in the U.S. lost all the gains it made hot on the heels of the Federal Reserve's (Fed) press conference on February 1.
World news agencies and many representatives of the expert community abundantly refer to an ongoing slide in Google-parent Alphabet shares after the disappointing "Google Live from Paris" event as much of what was discussed was just elaborations on previously announced products. The downslide also came after an error in the search inquiry demo results of its new artificial intellect chatbot was found. Shares of rival Microsoft failed to hold their initial gains of the week although Microsoft happily integrated the same kind of innovation into its search software.
Walt Disney stocks, which have updated their 5-month high after a strong great quarterly report, rolled back to negative territory at the close of the session, despite the initial 5.7% surge. The same thing happened with PepsiCo, which was able to increase the profit margin from carbonated drinks, but its share prices retained less than one percentage point of the 3.2% jump.
Esperio analyst note that the 2-10 Treasury yield curve inverted by more than 85 basis points, the deepest anomaly sign since the early 1980s. Of course, it could be one of the reasons to spark worries about real economic troubles while investors are trying to make a discount at a time when the central banks are clearly becoming more hawkish, with a high chance to aggravating stagflation blows for businesses. It seems as if all the different reasons to form the reversal patterns boil down to the one that will rule them all.
Alex Boltyan, senior analyst of Esperio company
Esperio: The Only Reason for the Reversal
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