05 Mar

Inflation is falling in Switzerland. Oil declines despite OPEC+ countries extending production cuts

March 5, 2024

By JustMarkets

At Monday’s stock market close, the Dow Jones Index (US30) was down 0.25%. The S&P 500 Index (US500) decreased by 0.12%. The NASDAQ Technology Index (US100) closed negative 0.41%. Stocks are seeing coverage of previously open positions. Markets await Fed Chairman Powell’s semi-annual testimony before a House committee on Wednesday and a Senate committee on Thursday for clues on future Fed policy. Powell is expected to maintain his hawkish stance and clarify that the Fed is in no hurry to cut interest rates. In addition, Friday will see the release of the monthly US payrolls report, which will provide insight into whether the labor market remains strong and whether wage pressures are contained.

Comments from Atlanta Fed President Bostic expects the Fed’s first interest rate cut in the third quarter to be followed by a pause to assess how the policy change affects the economy. Bostic added that he is concerned that businesses have too much optimism, and after a rate cut, it could spark a surge of new demand that would add to price pressures. Markets rate the odds of a 25 bps rate cut at 2% for the March 19-20 FOMC meeting and 21% for the April 30-May 1 meeting.

Tesla (TSLA) stock price fell more than 7% and topped the list of losers in the S&P 500 (US500) and NASDAQ (US100) after the China Passenger Car Association reported that February shipments of Tesla vehicles in China fell by 15.5% m/m. Apple (AAPL) is down more than 2% after the European Union fined it €1.8 billion ($2 billion) in connection with an investigation that it was shutting out competitors on its platforms. Nvidia (NVDA) shares are up more than 3% to a record high, surpassing Saudi Aramco to become the world’s third most valuable public company behind Apple and Microsoft. Lyft (LYFT) closed higher by more than 4% after RBC Capital Markets upgraded the stock to “optimistic” from “neutral” with a $23 price target.

Equity markets in Europe traded flat on Monday. German DAX (DE40) declined 0.11%, French CAC 40 (FR40) gained 0.28% yesterday, Spanish IBEX 35 (ES35) rose by 0.05% on Monday, and British FTSE 100 (UK100) closed negative 0.55%. European stock exchanges were weak on Monday as investors awaited the European Central Bank’s upcoming interest rate decision. The Central Bank is expected to keep rates unchanged despite weakening inflation.

Swiss inflation fell in February to its lowest level in nearly two and a half years. Consumer prices were 1.2% from a year earlier, down from January’s 1.3%, though slightly above the 1.1% forecast. The SNB met its target from May 2023 despite rising rents, higher sales tax, and energy prices. Lower inflation increases the likelihood that the SNB will cut rates at its next meeting on March 21. The probability that the SNB will cut rates from the current level of 1.75% is estimated by markets at 66%.

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WTI crude futures fell to around $78.5 a barrel on Tuesday, declining for a second straight session, as lingering demand concerns overshadowed an extension of supply cuts by OPEC and its allies. Analysts argued that subdued growth in global oil demand is likely to counter OPEC+ production cuts, raising questions about its output policy. Investors also priced in developments at a key policy meeting in China, where the government set its economic growth target 2024 at around 5%, matching expectations.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped 0.50%, China’s FTSE China A50 (CHA50) declined 0.13%, Hong Kong’s Hang Seng (HK50) gained 0.04% on the day, and Australia’s ASX 200 (AU200) was negative 0.13% on Monday.

China’s Caixin Services PMI fell to 52.5 in February 2024 from 52.7 in January. It was the 14th consecutive month of growth in service sector activity but the slowest pace since November last year amid subdued growth in total new work. The growth rate in new orders changed little and remained below the 2023 average.

Jibun Bank’s Japan Services PMI was revised upward to 52.9 in February 2024 from 52.5 after a four-month high of 53.1 in January. This marked the 18th consecutive month of growth in the services sector, helped by the sharpest rise in new business starts since August last year due to tourism demand and new product launches. However, growth was mainly driven by domestic demand.

Final data showed that the Judo Bank Flash Australian Services PMI business activity index rose to 53.1 in February from 49.1 in the previous month. This was the first rise in service sector activity in five months and the fastest since April 2023, as renewed growth in new orders led to a rebound in business activity. Improving demand conditions boosted activity in the services sector, with improved economic conditions and increased inquiries contributing to another rise in new work. New export orders also returned to growth for the first time since September 2023, supported by new customers and increased interest from customers in Asia.

S&P 500 (US500) 5,130.95 −6.13 (−0.12%)

Dow Jones (US30) 38,989.83 −97.55 (−0.25%)

DAX (DE40)  17,716.17 −18.90 (−0.11%)

FTSE 100 (UK100) 7,640.33 −42.17 (−0.55%)

USD Index 103.83 −0.03 (−0.03%)

Important events today:
  • – Australia Services PMI (m/m) at 00:00 (GMT+2);
  • – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
  • – Japan Services PMI (m/m) at 02:30 (GMT+2);
  • – China Caixin Services PMI (m/m) at 03:45 (GMT+2);
  • – Germany Services PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
  • – UK Services PMI (m/m) at 11:30 (GMT+2);
  • – Eurozone Producer Price Index (m/m) at 12:00 (GMT+2);
  • – US ISM Services PMI (m/m) at 17:00 (GMT+2);
  • – US FOMC Member Barr Speaks (m/m) at 19:00 (GMT+2);
  • – US FOMC Member Barr Speaks (m/m) at 22:30 (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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