The data on today’s inflation seems to have little impact on the American economy. Geopolitics takes center stage as the United States builds an unprecedented arsenal in the Middle East. T-Bonds continue to fluctuate: the 10-year yield drops 5 basis points to 3.967%, the 30-year yield decreases by 3.6 points to 4.633%, and the 2-year yield falls by 4.4 points to 3.404%.
The Labor Department reported that the Producer Price Index (PPI) rose by 0.5% in January, surpassing the consensus forecast of 0.3%. On an annual basis, the increase reaches 2.9%, exceeding the anticipated 2.6%. These numbers suggest a more persistent inflation than expected, which could complicate monetary policy.
However, these statistics are overshadowed by geopolitical tensions in the Middle East: India and China urge their citizens to leave Iran, while Germany warns its citizens in Israel to prepare for possible airspace closures. The US embassy in Beirut has begun evacuations, and this morning, US Ambassador to Jerusalem Mike Huckabee advised “non-essential” personnel and American citizens to leave Israeli land on “any available flight”.
This context undoubtedly revives risk aversion, leading to cautious investments in T-Bonds and safe-haven assets: gold increases by 1.2% (5,260 USD) and silver surges by 6% (93.6 USD). Additionally, oil prices rise by 2% in London and New York (72.3 and 66.5 USD respectively), as an ultimatum was reportedly set for Tehran to accept total denuclearization and the dismantling of its medium-range missiles (3,000 km).
In Europe, interest rates rise for similar reasons, despite disappointing inflation data in France (1% in January), as well as in Germany and Spain (2.3%). French government bonds extend to 3.217% (with French growth slowing to 0.2% in the fourth quarter), German Bunds decrease to 2.644%, Italian BTPs to 3.272%, Spanish Bonos to 3.067%, and British Gilts align at 4.236%.
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