26 Mar

Trade restrictions between the US and China are intensifying. Japan’s currency diplomats talk about possible intervention to support the yen

March 26, 2024

By JustMarkets

The Dow Jones Index (US30) decreased by 0.41% as of Monday’s stock market close. The S&P 500 Index (US500) was down 0.31%. The NASDAQ Technology Index (US100) closed negative 0.27%. Stock indices declined moderately on Monday as some hawkish comments from the Federal Reserve pushed T-note yields up and stocks lower. Atlanta Fed President Bostic said that if the economy performs as expected, the Fed can be patient with interest rates, and he expects only one 25 bps rate cut this year. Bostic’s prediction is less than the three 25 bps rate cuts the FOMC has scheduled for this year. Fed spokeswoman Cook said yesterday that a cautious approach to monetary easing may be needed to restore price stability and that cutting interest rates too quickly could risk entrenching inflation. Markets rate the odds of a 25 bps rate cut at 13% for the next FOMC meeting on May 1 and 79% for the June 12 meeting.

Take-Two Interactive Software closed down more than 6% after gaming publication Kotaku reported that Grand Theft Auto VI production has begun to be delayed, and the game may not be released in 2025. Shares of United Airlines Holdings (UAL) fell more than 3% after a report that the US Federal Aviation Administration is considering imposing temporary sanctions on the company, including a ban on adding new routes, following a series of safety incidents. In addition, Intel (INTC) and Advanced Micro Devices (AMD) shares fell after the Financial Times reported that China is seeking to restrict US-made microprocessors and servers in government computers.

Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) rose by 0.30%, France’s CAC 40 (FR40) closed Monday at its opening price, Spain’s IBEX 35 (ES35) added 0.08%, and the UK’s FTSE 100 (UK100) closed negative 0.17%. Frankfurt’s DAX (DE40) reached another record high of 18,268, gaining from the previous week and benefitting from dovish cues from major central banks. Increasing sentiment that policymakers are leaning towards rate cuts has led money markets to price in nearly a whole percentage point of ECB rate cuts this year ahead of the ECB meeting in early April. Automakers’ trading in Frankfurt rose sharply, with BMW and Volkswagen adding 2% and 1%, respectively, while Mercedes and Continental ended in the green territory. In addition, Allianz added more than 1%, leading to a positive session for the financial sector.

WTI crude oil prices rose above $82 per barrel on Tuesday, extending gains from the previous session, as various supply concerns supported oil prices. The Russian government ordered oil companies to cut production in the second quarter to meet OPEC’s target of 9 million bpd after output of around 9.5 million bpd in February. Ukrainian attacks on Russian refineries have also affected about 12% of the country’s refining capacity. In the Middle East, the UN Security Council passed a resolution calling for a ceasefire between Israel and Hamas. However, analysts doubt this will stop Houthi attacks on ships in the Red Sea disrupting supply routes.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.16%, China’s FTSE China A50 (CHA50) lost 1.03%, Hong Kong’s Hang Seng (HK50) was down 0.93% at the end of Monday, while Australia’s ASX 200 (AU200) was positive 0.53%.

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Japan’s annual business services inflation was unchanged at 2.1% in February, suggesting that companies continue to pass on rising labor costs to consumers thanks to the prospect of sustained wage growth. The annual increase in the service producer price index, which measures how much companies charge each other for services, was unchanged from January, data from the Bank of Japan (BoJ) showed Tuesday. Japan’s Finance Minister Shun’ichi Suzuki said he did not rule out taking any measures to curb yen weakness, adding that excessive volatility increases uncertainty for business operations and the broader economy. The remarks came a day after the country’s top currency diplomat, Masato Kanda, said the weakening yen did not reflect fundamentals and called recent moves speculative.

S&P 500 (US500) 5,218.19 −15.99 (−0.31%)

Dow Jones (US30) 39,313.64 −162.26 (−0.41%)

DAX (DE40) 18,261.31 +55.37 (+0.30%)

FTSE 100 (UK100) 7,917.57 −13.35 (−0.17%)

USD Index 104.23 −0.20 (−0.19%)

Important events today:
  • – Eurozone GfK German Consumer Climate (m/m) at 09:00 (GMT+2);
  • – US Durable Goods Orders (m/m) at 14:30 (GMT+2);
  • – US CB Consumer Confidence (m/m) at 16:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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