IMF Warns Global Military Spending Erases Post-Covid Infrastructure Rebuilding Needs

U.S. equities sank as a report on wholesale prices became the third in the past three days pointing to overheated inflation. The spike in the Producer Price Index (PPI), along with the earlier data on consumer prices and retail sales, in which we pointed out yesterday, raised concerns the Fed might not alter its monetary tightening policies anytime soon. The selling intensified in the last hour of trading yesterday, sending the Dow, S&P 500, and Nasdaq tumbling more than 1%.

The losses were broad-based, with 28 of the 30 stocks in the Dow losing ground. Walt Disney (DIS) shares led the decline, dipping 3%. Shares of Amgen (AMGN), Boeing (BA), Intel (INTC), Microsoft (MSFT), and Nike (NKE) dropped 2%. Shares of tech and home building names, which are sensitive to rising borrowing costs, turned lower. Tesla (TSLA) shares lost 5% as the electric carmaker recalled more than 362,000 vehicles because a glitch in its self-driving software could cause accidents.

IMF Managing Director Kristalina Georgieva said speaking at a panel at the Munich Security Conference 2023, a reorganization of global supply chains could result in a global GDP contraction of 0.2% to 7%. She noted that a loss of 7% would equate to "wiping out" the economies of Germany and Japan.

The recent increase in defense spending by countries across the globe could erase all the money that could have gone to infrastructure and development cooperation, she underlined.

Commoditywise, the prices of oil futures continued to record losses this European afternoon as ongoing fears in the U.S. Federal Reserve could soon introduce another hike in interest rates continued to impact markets around the world. Thus, WTI futures for settlements in March decreased by 2.62% at the time of writing to sell for $76.25 per barrel. At the same time, Brent futures for deliveries in April dropped by 2.60% to $82.62 per barrel.

European stock exchanges are trading this afternoon in the red, as market participants assessed the key data releases across the region. The latest report pointed to a significant increase of producer prices in Germany on a monthly basis, with the energy prices being the main driver of the rising costs. The largest gas importer in Germany, Uniper, suffered a €19.1 billion loss last year as the company faced severe pressure brought on by the shortage of Russian gas supply.

As of 3:00 p.m. CET, the Euro Stoxx 600 dropped 0.54%, and Frankfurt's DAX plunged 0.70%, as Allianz SE went down by 2.76%. The British FTSE 100 is trading down by 0.33%, with NatWest Group (NWG.L) nosediving 6.84%. The French CAC 40 slipped 0.50% as Kering SA (KER.PA) shed 0.92%.

In Asia, The China’s Academy of Information and Communications Technology (CAICT) reported earlier today that Mobile phone shipments in the country fell 22.6% annually and stood at 271.5 million in 2022. Using the same comparison, shipments of local brands decreased by 24.7% to 228.6 million units, accounting for 84.2% of all shipments in China in 2022.

In addition, all smartphone mobile phone shipments in the People's Republic dropped 23.1% from 2021 to 263.7 million units in 2022.