InvestMacro

By JustMarkets

Yesterday, the US stock indices fell sharply, mainly due to falling banking sector shares. Shares of SVB Financial Group (SIVB) fell more than 55% after the bank disclosed a net loss of $1.8 billion and gave a negative outlook for the year on the impact of higher interest rates. SVB Financial Group said it was taking aggressive measures to shore up its balance sheet, including selling shares and liquidating its securities portfolio. The SIVB’s fall has dampened sentiment toward bank stocks, which have been pressured by a deeper inversion of the yield curve, a harbinger of recession. As the stock market closed Thursday, the Dow Jones Index (US30) decreased by 1.66%, and the S&P 500 Index (US500) lost 1.85%. The NASDAQ Technology Index (US100) fell by 2.05%.

Investors remain tense ahead of Friday’s jobs report. The US economy is expected to grow by 200,000 jobs last month, well below January’s 517,000. The unemployment rate is forecast at 3.4%. Yesterday’s weekly labor market data showed that US employers announced 77,770 job cuts in February, down 24% from the 102,943 cuts announced in January. This indicates a resilient labor market. Many fear that a strong Nonfarm Payrolls report could solidify the return of aggressive rate hikes by the Federal Reserve.

On Thursday, President Joe Biden unveiled a $6.9 trillion budget proposal. The proposal, which the Republican-controlled House of Representatives will undoubtedly reject, showed little inclination to compromise. The president’s proposal would increase funding for a number of government programs, increase Medicare solvency, lower prescription drug prices, and reduce the deficit by $3 trillion over the next decade. Biden also proposes adding $77 billion for defense spending.

Stock markets in Europe were mostly down yesterday. Germany’s DAX (DE30) gained 0.01%, France’s CAC 40 (FR40) fell by 0.12%, Spain’s IBEX 35 (ES35) decreased by 0.45%, and Britain’s FTSE 100 (UK100) closed down 0.63%.

The ECB will raise rates by 50 basis points at its March meeting, and analysts expect the central bank to signal the next such move, probably in May. Executive Board spokeswoman Isabel Schnabel recently said that in order to slow the pace of rate hikes, she needs to see the ECB’s monetary policy become restrictive, which should show up in credit markets, labor markets, and various components of aggregate demand. But there is disagreement within the ECB. On the hawkish side, Holzmann argued that the ECB should raise the rate by 50 basis points at all the next four meetings. On the other hand, Visco did not appreciate such comments from his colleagues and said that decisions should be made meeting by meeting in an environment of high uncertainty. But in any scenario, the ECB will remain hawkish until the summer.

On Wednesday, crude oil prices fell for a second straight day, even as oil inventories fell. Inventories fell by 1.694 million barrels last week, the first weekly drop in inventories since December. The rise in the dollar index on the back of the US Federal Reserve’s aggressiveness outweighs the factors of falling inventories and rising demand from China.

Oil prices continued to fall Friday due to fears of more aggressive interest rate hikes by the US Federal Reserve and disappointing data from China. Markets are worried that a potential US recession triggered by tighter monetary conditions could hit oil demand this year. China’s weak economic signals also upset oil markets, as the world’s largest oil importer recorded a drop in oil imports between January and February. Expectations of higher interest rates are strengthening the dollar, putting pressure on commodities priced in the currency, mainly oil. A stronger dollar makes oil more expensive for international buyers, which reduces demand.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped 0.63%, China’s FTSE China A50 (CHA50) fell by 0.61%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.63%, India’s NIFTY 50 (IND50) fell by 0.93%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.05%.

The Bank of Japan kept interest rates at record lows on Friday and said it would continue the current rate of Yield Curve Control (YCC). The BOJ said in a statement that inflation is likely to slow by mid-2023, thanks to government subsidies on energy prices and easing pressure from high commodity rates. But the Bank of Japan also said that prices would rise again by the end of the year and that growing uncertainty about the economy underscored the need to maintain the adaptive monetary policy. This was the last meeting in the office for Haruhiko Kuroda.

S&P 500 (F) (US500) 3,918.32 −73.69 (−1.85%)

Dow Jones (US30)32,254.86 −543.54 (−1.66%)

DAX (DE40) 15,653.58 +75.19 (+0.01%)

FTSE 100 (UK100) 7,879.98 −49.94 (−0.63%)

USD Index 105.28 −0.38 (−0.36%)

• – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
• – Japan BoJ Rate Statement at 05:00 (GMT+2);
• – Japan BoJ Press Conference at 07:00 (GMT+2);
• – UK GDP (m/m) at 09:00 (GMT+2);
• – UK Industrial Production (m/m) at 09:00 (GMT+2);
• – UK Manufacturing Production (m/m) at 09:00 (GMT+2);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• – US Unemployment Rate (m/m) at 15:30 (GMT+2);
• – Canada Unemployment Rate (m/m) at 15:30 (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.

By JustMarkets

Analysts and investors struggled to find a reason to be optimistic about stocks yesterday. Still, stock indices remained under pressure Wednesday amid lingering fears of renewed aggressive rate hikes by the Federal Reserve. The latest labor market data showed that private-sector job gains in February exceeded economists’ estimates, increasing the likelihood that the Fed will be forced to accelerate the rate hikes at its March meeting. The probability of a return to raising rates by 50 basis points at the Fed meeting on March 21-22 rose to 80% compared to 71% the day before. As the stock market closed Wednesday, the Dow Jones Index (US30) decreased by 0.18%, while the S&P 500 Index (US500) added 0.14%. The NASDAQ Technology Index (US100) gained 0.40%.

The Bank of Canada left the interest rate unchanged at 4.5%. This was the first pause among major central banks. But the Bank of Canada reiterated its statement that it is willing to keep raising the interest rate if necessary to get back to its 2% target. But analysts believe this is just a formality, and officials have already hit the pause button for the rest of the year.

Stock markets in Europe were mostly up Wednesday. German DAX (DE30) gained 0.46%, French CAC 40 (FR40) shed by 0.20%, Spanish IBEX 35 (ES35) added 0.67%, and British FTSE 100 (UK100) closed yesterday on the plus side by 0.13%.

The increase in short-term rates in the US influenced the prospects of the European Central Bank. The swap market is showing more confidence (85%) in a 50 basis point rate hike in May, which would raise the deposit rate to 3.50%. Nomura raised its forecast for the ECB, predicting that the final rate will reach 4.25% — with changes of 50 basis points in March, May, and June, followed by a final quarter-point increase in July.

On Wednesday, crude oil prices fell for a second straight day, even as oil inventories fell. Inventories fell by 1.694 million barrels last week, the first weekly drop in inventories since December. The rise in the dollar index on the back of the US Federal Reserve’s aggressiveness outweighs the factors of falling inventories and rising demand from China.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 0.48%, China’s FTSE China A50 (CHA50) fell by 0.80%, Hong Kong’s Hang Seng (HK50) ended the day down by 2.35%, India’s NIFTY 50 (IND50) gained 0.24%, and Australia’s S&P/ASX 200 (AU200) ended the day negative by 0.77%.

Japan’s economy is suffering from slowing demand overseas due to worsening global growth, leading to a record trade deficit and the largest output contraction in eight months in January. Japan reported a record trade deficit for January (~3.2 trillion yen, or ~$23.7 billion). Japan’s gross domestic product (GDP) increased by 0.1% year-over-year in the last quarter against a preliminary estimate of 0.6% growth and well below economists’ average forecast of 0.8% growth. In an effort to boost household purchasing power, the government and the Bank of Japan (BOJ) are urging firms to raise workers’ wages at the annual spring wage talks, which conclude this month.

China’s annualized consumer price index fell from 2.1% to 1%, well below the 1.9% forecast. The factory inflation fell to 1.4% on an annualized basis. The data show that despite a rebound in business activity, China’s economic recovery is still in its infancy as the country struggles to recover from three years of strict COVID-19 restrictions.

S&P 500 (F) (US500) 3,992.01 +5.64 (+0.14%)

Dow Jones (US30)32,798.40 −58.06 (−0.18%)

DAX (DE40) 15,631.87 +72.34 (+0.46%)

FTSE 100 (UK100) 7,929.92 +10.44 (+0.13%)

USD Index 105.69 +0.08 (+0.07%)

• – Japan GDP (q/q) at 01:50 (GMT+2);
• – China Consumer Price Index (m/m) at 03:30 (GMT+2);
• – China Producer Price Index (m/m) at 03:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (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.

By JustMarkets

The stock market fell on Tuesday as hawkish remarks from Federal Reserve Chairman Jerome Powell increased the odds that the Fed will return to an aggressive rate hike course. The main talking points from Powell’s speech yesterday were:

• The Fed is poised to accelerate rate hikes if economic data comes in strong;
• The rate hike is likely to be higher than many expect;
• Further rate hikes are appropriate;
• Premature easing is undesirable at this point;
• It is appropriate to hold the rate at an elevated level for some time.

The likelihood of a 50 basis point interest rate hike at the March 21-22 Fed meeting jumped to nearly 70% from 24% the day before. The hawkish statements pushed Treasury yields higher, with 2-year bond yields exceeding 5% for the first time since 2007. The rise in yields led to a sharp rise in the dollar index and a decline in the major indices. At the close of the stock market on Tuesday, the Dow Jones index (US30) decreased by 0.72%, and the S&P 500 index (US500) lost 1.53%. NASDAQ Technology Index (US100) fell by 1.25%.

The prospect of a US rate hike to 6% is becoming quite real. According to BlackRock Inc. and Schroders Plc, given a robust labor market and sustained inflation, there is a real possibility that the Fed will have to bring the federal funds rate to 6% and then hold it at that level for an extended period of time to slow the economy and bring inflation down to nearly 2%. Swap traders now estimate a full percentage point increase in Fed rates over the next four meetings. The Fed’s rhetoric also risks dampening the outlook for emerging market assets.

The OECD’s latest “Canadian Economic Outlook” says that faster growth in living standards will require a stronger business environment to bring Canada’s weak productivity and investment growth in line with the leading economies. As an open economy, Canada will be vulnerable to any sudden slowdown in global demand and to volatility in commodity and financial markets due to the war in Ukraine in the future. The review presents updated GDP growth forecasts of 1.3% for 2023 and 1.5% for 2024. The tight monetary policy last year will help bring inflation down to 2% by the end of 2024.

Stock markets in Europe were mostly down on Tuesday. Germany’s DAX (DE30) decreased by 0.60%, France’s CAC 40 (FR40) fell by 0.46%, Spain’s IBEX 35 (ES35) decreased by 1.07%, and the British FTSE 100 (UK100) closed yesterday down by 0.13%.

The European Central Bank (ECB) is increasingly concerned about the current level of inflation in the single bloc. There is now talk of an additional ECB interest rate hike of 200 basis points in the coming months to combat persistently high price pressures in the eurozone, raising the central bank rate to 4.5%.

Precious metal prices just collapsed yesterday on the back of Powell’s speech to Congress. Gold and silver are inversely correlated to government bond yields. As monetary policy tightens and interest rates rise, government bond yields go up, which puts downward pressure on gold and silver quotes. For the resumption of the uptrend in gold, it is very important that the US Federal Reserve stops tightening monetary policy.

Asian markets traded yesterday without a single trend. Japan’s Nikkei 225 (JP225) gained 0.25%, China’s FTSE China A50 (CHA50) shed by 1.17%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.33%, India’s NIFTY 50 (IND50) did not trade yesterday, while Australian S&P/ASX 200 (AU200) ended the day up by 0.49% gain.

Major Japanese companies are expected to hold the biggest wage hike in 26 years during next week’s wage negotiations, giving policymakers hope that the country will finally emerge from its deflationary stagnation. This will be crucial for the Bank of Japan (BOJ) as to how soon the bank can end its bond yield control policy under new Governor Kazuo Ueda. It will also be a test of Prime Minister Fumio Kishida’s flagship “new capitalism” policy, which aims to distribute wealth more widely to households by inducing firms to raise wages.

The Reserve Bank of Australia is close to pausing the process of tightening monetary policy. The main takeaway from yesterday’s speech by RBA Governor Lowe was:

• We’ve done a lot in a short period of time;
• At some point, it will be appropriate to sit still;
• If the data before the next board suggests a pause, we will do that;
• We will have a completely open mind at board meetings.

S&P 500 (F) (US500) 3,986.37 −62.05 (−1.53%)

Dow Jones (US30)32,856.46 −574.98 (−1.72%)

DAX (DE40) 15,559.53 −94.05 (−0.60%)

FTSE 100 (UK100) 7,919.48 −10.31 (−0.13%)

USD Index 105.61 +1.26 (+1.20%)

• – German Industrial Production (m/m) at 09:00 (GMT+2);
• – German Retail Sales (m/m) at 09:00 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 12:00 (GMT+2);
• – Eurozone GDP (q/q) at 12:00 (GMT+2);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
• – US Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada Trade Balance (m/m) at 15:30 (GMT+2);
• – US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
• – Canada BoC Interest Rate Decision at 17:00 (GMT+2);
• – Canada BoC Rate Statement at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (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.

By JustMarkets

The US Treasury yields rose yesterday ahead of Powell’s speech to Congress, which could give clues as to the US Federal Reserve’s future monetary policy. Investors and funds are starting to hedge and close their trades after the good rally in the last days of last week. At the close of the stock market on Monday, the Dow Jones (US30) increased by 0.12%, and the S&P 500 (US500) added 0.07%. The NASDAQ Technology Index (US100) decreased by 0.11%.

The US Federal Reserve Chairman Jerome Powell will address Congress today to present the central bank’s semiannual monetary policy report. He will address the Senate on Tuesday and the House of Representatives on Wednesday. His comments will be scrutinized for hints about whether a broader rate hike is being considered this month after recent data pointing to solid inflation. Powell’s hawkish bias could trigger a sell-off in the stock market in favor of the dollar index as a defensive asset. Conversely, any hint from Powell that the US Fed is abandoning its hawkish stance could cause Treasury yields to fall further, pushing the dollar index down and the stock indices up.

Shares of Apple (AAPL) jumped about 2% after Goldman Sachs issued a “buy” recommendation on the stock, citing the tech giant’s strong position in services. Meanwhile, shares of Tesla (TSLA) fell more than 2% after the electric-car maker cut prices in the US for the second time this year to boost demand. Tesla also suffered from Morgan Stanley ruling out the electric carmaker as a “better choice” in favor of Ferrari. Morgan Stanley raised its target Ferrari NV (RACE) price to $310 a share.

Stock markets in Europe were mostly up Monday. Germany’s DAX (DE30) added 0.48%, France’s CAC 40 (FR40) gained 0.34%, Spain’s IBEX 35 (ES35) jumped by 0.49%, Britain’s FTSE 100 (UK100) closed yesterday down by 0.22%.

The European Central Bank should raise interest rates by 50 basis points at each of the next four meetings as inflation remains resilient, said Robert Holzmann, head of the Austrian central bank. Holzmann is considered the ECB’s most hawkish spokesman. The four steps advocated by Holzmann would raise the deposit rate to 4.5%, well above the current projected rate of 4%. Holzmann also urged the ECB to accelerate the reduction of the bank’s balance sheet by stopping full reinvestment in its Pandemic Emergency Purchase Program (PEPP). All debt maturing in the PEPP scheme must now be fully reinvested in the market until 2024.

Asian markets were also mostly up yesterday. Japan’s Nikkei 225 (JP225) jumped by 1.11%, China’s FTSE China A50 (CHA50) fell by 0.80%, Hong Kong’s Hang Seng (HK50) ended the day up 0.17%, India’s NIFTY 50 (IND50) added 0.67%, and Australia’s S&P/ASX 200 (AU200) ended the positive by 0.62%.

China set its GDP growth target for this year at about 5%, lower than last year’s target of about 5.5%. Last week’s stronger-than-expected data on activity in China’s manufacturing and service sectors point to an economic recovery. Given that China is Australia’s largest export market, any improvement in China’s growth outlook could improve Australia’s growth prospects.

The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points. The rate rose from 3.35% to 3.6%. The monetary policy statement indicates that the RBA is leaving the door open for further increases. The move was expected as inflation rose to its highest level in three decades last quarter, and there are still no signs of inflationary pressures easing.

The Bank of Japan has set the discount rate at 0.10% and remains in control of the yield curve (YCC), targeting a range of 0.50% near zero for Japanese government bonds (JGBs) for up to 10 years. The 10-year JGB trades steadily near the upper bound of 0.50%, forcing the BoJ to intervene frequently. Incoming Bank of Japan (BoJ) Governor Kazuo Ueda clarified last week that he would take the same stance as outgoing Governor Haruhiko Kuroda. The BoJ will meet this week, where current governor Haruhiko Kuroda will speak for the last time in office.

S&P 500 (F) (US500) 4,048.42 +2.78 (+0.069%)

Dow Jones (US30)33,431.44 +40.47 (+0.12%)

DAX (DE40) 15,653.58 +75.19 (+0.48%)

FTSE 100 (UK100) 7,929.79 −17.32 (−0.22%)

USD Index 104.53 −0.50 (−0.48%)

• – Australia Retail Sales (m/m) at 02:30 (GMT+2);
• – China Trade Balance (m/m) at 05:00 (GMT+2);
• – Australia RBA Interest Rate Decision (m/m) at 05:30 (GMT+2);
• – Australia RBA Rate Statement (m/m) at 05:30 (GMT+2);
• – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
• – US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
• – Switzerland SNB Chairman Jordan speaks at 20:30 (GMT+2);
• – Australia RBA Gov Lowe speaks at 23:55 (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.

By ForexTime 

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

The recent string of strong economic data has caused investors to rethink how much more Fed tightening is needed to slow the economy significantly. Investors have begun to realize that the Fed will stop raising rates probably before early summer, and the current price levels in the stock market are a great opportunity to buy or average portfolios. This caused the indices to rise sharply at the end of last week. At the close of the stock market on Friday, the Dow Jones Index (US30) increased by 1.17% (+1.47% for the week), and the S&P 500 (US500) added 1.61% (+1.33% for the week). The NASDAQ Technology Index (US100) jumped by 1.97% on Friday (+1.49% for the week). The S&P 500 (US500) broke a three-week losing streak, and the Dow Jones Industrial Average (US30) posted its first weekly gain since late January.

The fourth-quarter reporting season is coming to a close, and all but seven companies in the S&P 500 have reported. According to Refinitiv, results for the quarter beat consensus forecasts 68% of the time.

Federal Reserve Bank of Richmond President Thomas Barkin said Friday that he could envision a scenario in which the central bank would raise the US benchmark interest rate to a range of 5.5%-5.75%. Barkin also added that inflation might cool faster than he expects, implying a shallower rate trajectory. But it is more likely that inflation will persist, requiring the Fed to do more. That said, the policymaker does not expect a rate cut before the end of 2023.

(DE30) gained 1.64% (+1.48% for the week), French CAC 40 (FR40) added 0.88% (+1.48% for the week), Spanish IBEX 35 (ES35) jumped by 0.47% (+2.29% for the week), British FTSE 100 (UK100) closed on Friday with 0.04% (+0.87% for the week).

The latest Eurozone inflation report showed that price pressures remain persistently high in the single block, especially for core inflation. The ECB will meet in mid-March to announce its next 50bp interest rate hike. And this scenario is already almost entirely factored into prices. Several ECB policymakers have recently warned that ECB rate hikes should continue until core inflation turns around. With the head of the ECB expecting core inflation to remain high through the summer, there is a high probability that the ECB will undertake another 0.5% rate hike at its May meeting.

On Friday, the Wall Street Journal reported that there is an internal debate in the United Arab Emirates over the prospect of leaving OPEC. The UAE’s decision to leave the Organization of Petroleum Exporting Countries would reduce the group’s authority to set oil prices, which account for nearly 38% of global production. The Emirates produces more than 3 million barrels a day and is OPEC’s third-largest oil producer. Analysts say oil prices are likely to be in the $75 to $80 a barrel range.

Saudi Arabia raised oil prices for Asia and Europe for April. The reason is rising demand from China, the world’s biggest oil importer. Aramco sells about 60% of its crude supply to Asia, mostly under long-term contracts whose prices are reviewed monthly. China, Japan, South Korea, and India are the biggest buyers. According to some experts, as the heat approaches, demand will only increase, which, given the current supply, could push oil prices back up to $100 a barrel.

Asian markets mostly declined last week. Japan’s Nikkei 225 (JP225) jumped by 2.21% over the week, China’s FTSE China A50 (CHA50) gained 1.90%, Hong Kong’s Hang Seng (HK50) jumped by 3.77%, India’s NIFTY 50 (IND50) added 0.89%, and Australia’s S&P/ASX 200 (AU200) was negative by 0.32%.

China maintained its language on Taiwan in its annual report to the country’s legislature, suggesting that President Xi Jinping maintains his policy on the self-governing island even as global tensions rise. “We must promote the peaceful development of relations on both sides of the Taiwan Strait and advance the process of China’s peaceful reunification,” Premier Li Keqiang said in a work report to the National People’s Congress. On the one hand, this is great news for the de-escalation of relations between China and Taiwan along with the United States. On the other hand, at the same time, China has increased defense spending by 7.2%, which contrasts slightly with plans to resolve things diplomatically. But it should be noted that since Russia’s invasion of Ukraine, the world has begun “military reform” – almost all countries have begun to increase military budgets, especially European countries.

For its part, the Biden administration is close to tightening regulations on some foreign investments by US companies in order to limit China’s ability to acquire technology that could improve its military power. This is another attempt by the White House to hit China’s military and technology sectors at a time of increasingly strained relations between the world’s two largest economies.

In the commodities market, futures on natural gas (+18.37%), platinum (+8.37%), gasoline (+6.76%), sugar (+6.41%), palladium (+5.06%), WTI oil (+4.63%), Brent oil (+3.42%), copper (+3.01%), silver (+2.76%) and gold (+2.51%) showed the biggest gains last week. Futures on orange juice (-8.82%), coffee (-5.06%), and wheat (-1.84%) showed the biggest drop.

S&P 500 (F) (US500) 4,045.64 +64.29 (+1.61%)

Dow Jones (US30)33,390.97 +387.40 (+1.17%)

DAX (DE40) 15,578.39 +250.75 (+1.64%)

FTSE 100 (UK100) 7,947.11 +3.07  (+0.039%)

USD Index 104.53 -0.50 (-0.48%)

• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
• – UK Construction PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• – Canada Ivey PMI (m/m) at 17:00 (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.

By JustMarkets

The US Treasury bond yields fell sharply yesterday after Atlanta Federal Reserve President Rafael Bostic ruled out a return to more aggressive Fed rate hikes and said the central bank would suspend its tightening efforts by mid to late summer. This brought optimism back to the stock market. As the stock market closed Thursday, the Dow Jones Index (US30) increased by 1.05%, and the S&P 500 Index (US500) added 0.76%. The NASDAQ Technology Index (US100) closed positive by 0.73%.

According to the US Department of Labor, initial jobless claims fell by 2,000 to 190,000 last week. Separate data showed that labor costs per unit rose 3.2% year-over-year in the fourth quarter, nearly three times the preliminary estimate. The figures underscore the steady strength of the labor market.

Wells Fargo has pushed back its US recession forecast and now expects an economic slowdown in the second half of the year and expects interest rates to remain high for an extended period.

Macy’s (M) reported quarterly earnings that beat expectations, sending the department store chain’s stock up more than 10%.

Stock markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.15%, French CAC 40 (FR40) jumped by 0.69%, Spanish IBEX 35 (ES35) added 0.02%, and British FTSE 100 (UK100) closed yesterday with a 0.37% gain.

The latest Eurozone inflation data showed that inflationary pressures remain elevated. The annualized consumer price index fell from 8.6% to 8.5%, but core inflation (excluding food and energy prices) unexpectedly rose from 5.3% to 5.6%. ECB meeting minutes on Thursday showed that the central bank would continue to raise interest rates after its March meeting. Analysts are currently forecasting a 0.5% ECB rate hike both at the March meeting and in May and another final 0.25% hike in June.

Oil prices rose Thursday, helped by signs of a strong economic recovery in China, the biggest importer of crude oil, and easing fears of aggressive rate hikes in the United States.

As the Federal Open Market Committee (FOMC) nears a peak in interest rates this summer, investors are starting to invest in gold. Gold is inversely correlated to government bond yields, which rise as interest rates rise. Therefore, a peak in rates would end the uptrend in yields, which would return fundamental support to the precious metals.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.06% for the day, China’s FTSE China A50 (CHA50) fell by 0.32%, Hong Kong’s Hang Seng (HK50) was down by 0.92% for the day, India’s NIFTY 50 (IND50) lost 0.74%, and Australia’s S&P/ASX 200 (AU200) was positive by 0.05%.

Japanese bond yields remain high as the Bank of Japan is unwilling to change its soft monetary policy. Incoming BOJ Governor Kazuo Ueda said that now might not be the time to abandon current monetary policy given the current economic circumstances, a sign that the BoJ plans to stick with large-scale quantitative easing for the foreseeable future without making major adjustments to yield curve controls. The latest economic data showed that Tokyo’s core inflation rate fell from 4.3% to 3.3% year-over-year, and the unemployment rate also showed a decline from 2.5% to 2.4%. Such macro statistics are good for the BoJ in terms of maintaining stimulus.

S&P 500 (F) (US500) 3,981.35 +29.96 (+0.76%)

Dow Jones (US30)33,003.57 +341.73 (+1.05%)

DAX (DE40) 115,327.64 +22.62 (+0.15%)

FTSE 100 (UK100) 7,944.04 +29.11 (+0.37%)

USD Index 104.42 −0.45 (−0.43%)

• – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
• – Japan Unemployment Rate (m/m) at 01:30 (GMT+2);
• – Japan Services PMI (m/m) at 01:30 (GMT+2);
• – German 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);
• – Canada Building Permits (m/m) at 15:30 (GMT+2);
• – US ISM Services PMI (m/m) at 17:00 (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.