InvestMacro

By JustMarkets

As of Wednesday’s stock market close, the Dow Jones Index (US30) lost 0.25% and fell to a one-month low, while the S&P 500 Index (US500) was down by 0.56% yesterday. The NASDAQ Technology Index (US100) closed negative by 0.59%.

Economic news from the US on Wednesday was hawkish for Fed policy and bullish for the US dollar, which pressured the indices. Retail sales for December rose by 0.6% m/m, beating expectations of 0.4% m/m. Manufacturing production for December rose by 0.1% m/m, stronger than expectations of no change. The Fed’s Beige Book also supported the dollar as it stated that most Fed districts reported little or no change in economic activity, and overall, their firms’ expectations for future growth remain positive.

PayPal Holdings (PYPL) closed higher by more than 2%, leading the Nasdaq 100 higher after CEO Criss said the company would now focus on profitability and prioritize growth as he sought to “get the business right.” Boeing (BA) is up by more than 1% and led the Dow Jones Industrials stocks higher after the FAA completed its first 40 inspections of Boeing’s 737-9 Max airplanes and found no problems.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 0.84%, France’s CAC 40 (FR40) lost 1.07%, Spain’s IBEX 35 (ES35) declined by 1.26% on Wednesday, and the UK’s FTSE 100 (UK100) closed negative by 1.48%. Geopolitical tensions in the Middle East are rising (Red Sea attacks), and markets are beginning to cool expectations for interest rate cuts in 2024, robbing risky equity markets of some bullish support.

ECB President Lagarde said yesterday that policymakers need more evidence before they can be confident that consumer prices are under control. Lagarde also indicated that the ECB’s first-rate cut is likely to come in the summer, not in the spring as economists had expected. Knot, a spokesman for the ECB’s governing council, said yesterday that markets are getting ahead of themselves and the ECB needs to see a turnaround in wages before the Bank will consider an interest rate cut.

The UK Consumer Price Index unexpectedly rose to 4.0% y/y in December from 3.9% y/y in November, beating expectations of 3.8% y/y. The core CPI for December was unchanged from November at 5.1% y/y, exceeding expectations of 4.9% y/y. The core and core inflation measures delivered an upward surprise, but temporary price pressures are unlikely to have an impact on the Bank of England as a more detailed report showed that the high inflation reading for December did not indicate an overall rise in the prices of the components that make up the core index, indicating continued progress in bringing inflation down to 2%.

Yesterday, Shell announced the cessation of all shipping through the Red Sea in response to recent Houthi attacks on marine vessels. Houthi rebels continue to attack ships in the Red Sea off the coast of Yemen. Geopolitical tensions in the region will contribute to higher energy prices, as well as inflation in general, as carriers are forced to divert ships through Africa, increasing transportation and insurance costs, which will ultimately lead to higher commodity prices for the end consumer.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was down by 0.40%, China’s FTSE China A50 (CHA50) lost 2.34% on Wednesday, Hong Kong’s Hang Seng (HK50) decreased by 3.71% on the day, and Australia’s ASX 200 (AU200) was negative by 0.29% on Wednesday.

Australia’s labor market contracted slightly in December. Total employment fell by 65,100, weaker than expectations of a 17,600 increase and largely reversing the 61,500 increase seen in the previous month. The participation rate (the percentage of the working-age population in the labor force or looking for work) fell to 66.8% from a record high of 67.2% in the previous month. Despite this, the unemployment rate remained unchanged at 3.9%, its lowest level in 50 years. The Reserve Bank of Australia (RBA) predicts a possible cooling in the labor sector but has no plans to cut rates anytime soon. The RBA is almost 100% likely to keep rates unchanged at its February meeting.

ANZ economists are leaning towards the Reserve Bank of New Zealand (RBNZ) starting to cut the official money rate in August. Consecutive 25 basis point rate cuts are expected starting in August, bringing the rate down to 3.5% (from 5.5%) within 12 months. ANZ’s current forecasts are for inflation to return to the target range of 1% to 3% by the September quarter and for unemployment to pass the 5% mark and continue to rise.

S&P 500 (US500) 4,739.21 −26.77 (−0.56%)

Dow Jones (US30) 37,266.67 −94.45 (−0.25%)

DAX (DE40) 16,431.69 −139.99 (−0.84%)

FTSE 100 (UK100) 7,446.29 −112.05 (−1.48%)

USD Index 103.38 +0.02 (+0.02%)

• – Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
• – Japan Industrial Production (m/m) at 06:30 (GMT+2);
• – World Economic Forum Annual Meetings at 10:00 (GMT+2);
• – Switzerland SNB Chairman Jordan Speaks at 12:30 (GMT+2);
• – Eurozone ECB Monetary Policy Meeting Accounts at 14:30 (GMT+2);
• – US Building Permits (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 18:00 (GMT+2);
• – US FOMC Member Bostic Speaks at 18:30 (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

As of Tuesday’s stock market close, the Dow Jones Index (US30) was down by 0.62% and fell to a one-month low, while the S&P 500 Index (US500) fell by 0.37% yesterday. The NASDAQ Technology Index (US100) closed negative by 0.19%.

Fed Chief Waller’s hawkish comments on Tuesday supported the dollar and pressured the indices after he said that when the Fed starts to cut interest rates, it should be methodical and cautious, and there is no reason to move as quickly and cut rates as precipitously as in the past.

Economic news from the US on Tuesday was negative for the indices as well after the January Empire Index of overall business conditions in the manufacturing sector unexpectedly fell by 29.2 to a 3-year low of negative 43.7, weaker than expectations of a rise to negative 5.0.

Boeing (BA) shares fell more than 6% yesterday, topping the list of losers in the S&P500 (US500) and NASDAQ (US100) after Wells Fargo Securities downgraded the stock to neutral from upgraded, citing an increased risk that growing scrutiny of the company’s manufacturing quality will affect production or delivery rates. Morgan Stanley (MS) shares fell more than 4% yesterday after the bank reported fourth-quarter sales and trading revenue of $2.20 billion, below consensus of $2.26 billion. Apple (AAPL) is down more than 1% after the company cut prices on the iPhone 15 and other products in China in an attempt to spur weak demand for new models. Shares of Nvidia (NVDA) are up more than 3% after KeyBanc Capital Markets raised its price target on the company’s stock from $650 to $740.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 0.30%, France’s CAC 40 (FR40) lost 0.18%, Spain’s IBEX 35 (ES35) decreased by 0.82% on Tuesday, and the UK’s FTSE 100 (UK100) closed negative 0.48%.

The economic growth expectations index from Germany’s ZEW survey for January unexpectedly rose by 2.4 to an 11-month high of 15.2, stronger than expectations for a decline to 11.7. ECB 1-year Eurozone inflation expectations fell to 3.2% from 4.0% in October, the lowest in 21 months. 3-year inflation expectations fell to a 22-month low of 2.2% from 2.5% in October, better than expectations of 2.4%. The decline in Eurozone inflation expectations is dovish for ECB policy. Swaps estimate the odds of a 25 bps ECB rate cut to 2% at the next meeting on January 25 and 25% at the March 7 meeting. Yesterday, there were also speeches from several ECB officials. ECB Governing Council representative Simkus said he was optimistic about an ECB rate cut this year but much less optimistic than the markets about a rate cut in March or April. His colleague Centeno noted that the inflationary trajectory in the Eurozone is good and that Eurozone GDP still looks rather stagnant in the first quarter. ECB Governing Council representative Villeroy de Gallo indicated that the question of the ECB cutting interest rates this year is premature as the ECB is likely to be more patient.

Brent crude rose slightly on Tuesday, while WTI fell as investors saw fundamentals weakening in the US, but ongoing naval and air conflicts in the Red Sea heightened fears that tankers would have to reroute to avoid the area, increasing costs and delivery times.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) retreated from highs and decreased by 0.79%, China’s FTSE China A50 (CHA50) was up by 0.62% on Tuesday, Hong Kong’s Hang Seng (HK50) lost 2.16% on the day, and Australia’s ASX 200 (AU200) was negative 1.09% on Tuesday.

China’s economy grew to 5.2% in the fourth quarter, surpassing Beijing’s target of 5% for 2023. But much of that growth was driven by a lower base compared to 2022. Other data showed that Asia’s largest economy is still struggling to regain growth (output rose from 6.6% to 6.8% y/y, retail sales fell sharply from 10.1% to 7.3% y/y, the unemployment rate rose from 5.0% to 5.1% y/y) after the lull of the COVID period amid continued pressure from weak consumer spending, sluggish private investment and the ongoing real estate crisis.

Soft Japan PPI data released earlier this week indicated that the BOJ is under little pressure to tighten policy, a view that is expected to be confirmed by CPI data due out this Friday.

S&P 500 (US500) 4,783.83 +3.59 (+0.08%)

Dow Jones (US30) 37,592.98 −118.04 (−0.31%)

DAX (DE40)  16,704.56 +157.53 (+0.95%)

FTSE 100 (UK100) 7,624.93 +48.34 (+0.64%)

USD Index  102.44 +0.15 (+0.15%)

• – World Economic Forum Annual Meetings at 10:00 (GMT+2);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
• – Eurozone Trade Balance (m/m) at 12:00 (GMT+2);
• – Canada Business Outlook Survey 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 stock market did not trade yesterday due to the bank holiday.

Bank of Canada, business and consumer surveys showed that the economy has suffered from the Bank’s aggressive rate hike campaign, reinforcing the view that the tightening cycle is likely over and setting the stage for policymakers to start considering rate cuts as early as the first half of this year. Canada will release inflation data today. Economists forecast core inflation to remain at 2.8% in annualized terms, while overall inflation is forecast to jump from 3.1% to 3.4% y/y. However, the Bank of Canada prefers to focus more on median values. The median CPI is expected to fall from 3.4% to 3.3% y/y. Lower inflation will put pressure on the Canadian currency, but a lot will also depend on oil prices, as CAD is a commodity currency, and higher oil prices tend to strengthen the Canadian currency.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.49%, France’s CAC 40 (FR40) lost 0.72% yesterday, Spain’s IBEX 35 (ES35) decreased by 0.18%, and the UK’s FTSE 100 (UK100) closed negative by 0.39%.

EU manufacturing output continued to fall in November on both a monthly and annualized basis. EU manufacturing output fell by 6.3% year-on-year in November 2022, the seventh consecutive year-on-year decline. As in the EU as a whole, November was the weakest month for German industrial production since September 2021. Germany’s annualized price-adjusted GDP in 2023 was 0.3% lower than the previous year as Germany’s overall economic development slowed in 2023.

With most central bank governors agreeing that interest rates have probably peaked, the world is entering a period where markets will be watching to see which of the major banks will be the first to cut rates. Interest rate expectations now suggest around 6-7 cuts for the dollar and euro, while expectations for sterling have risen significantly and now predict around 5-6 cuts in 2024.

The Middle East is critical to global oil supplies, with major producers, including Saudi Arabia, Iraq, and the UAE, relying on transportation routes, including the strategic Bab el-Mandeb Strait near Yemen. About 4.8 million barrels of crude oil and petroleum products pass through this narrow strait daily. That’s why Yemen’s attacks on shipping in the region have led to a response from the US and allies. Yesterday, the US Consulate in Erbil in northern Iraq was heavily damaged in an attack by ballistic missiles and drones fired by Iran. Thus, the degree of war in the region is starting to be prohibitive and could escalate into a serious armed conflict between Yemen and Iran vs. the US and its allies.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) continues to break records, up by 0.91%, China’s FTSE China A50 (CHA50) was down by 0.08% on Monday, Hong Kong’s Hang Seng (HK50) decreased by 0.17% on the day, and Australia’s ASX 200 (AU200) was negative by 0.03%.

The latest Chinese data suggests the economy is starting 2024 on shaky legs: persistent deflationary pressures and a modest rebound in exports are unlikely to turn around weak domestic activity quickly. December bank lending was also weak. China’s economic outlook in 2024 will be shaped by the outlook for the real estate sector. The government’s goal is to reduce the oversupply that has built up in the sector in recent years and bring supply in line with real demand. The People’s Bank of China (PBoC) has pledged to step up policy support for the economy this year and help prices recover. However, the PBoC faces a dilemma as more credit is directed toward productive forces than consumption, which could increase deflationary pressures and reduce the effectiveness of monetary policy tools.

A former Bank of Japan (BoJ) executive believes the BoJ is likely to be encouraged by better results from annual wage talks, which will pave the way for an end to negative interest rates this spring. That’s one of the main reasons most BoJ watchers predict the Central Bank will wait until April before raising rates for the first time since 2007. However, recent economic data showed persistent weakness in Japan’s producer price index inflation, indicating additional pressure on the BOJ to continue its ultra-soft stance.

The Australian and New Zealand dollars hit one-month lows on Tuesday, breaking through key support levels as risk appetite eased and domestic data reinforced signs that interest rates in Australia have peaked.

S&P 500 (US500) 4,783.83 0 (0%)

Dow Jones (US30) 37,592.98 0 (0%)

DAX (DE40)  16,622.22 −82.34 (−0.49%)

FTSE 100 (UK100) 7,594.91 −30.02 (−0.39%)

USD Index  102.59 +0.19 (+0.18%)

• – UK Average Earnings Index (m/m) at 09:00 (GMT+2);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+2);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+2);
• – German Consumer Price Index (m/m) at 09:00 (GMT+2);
• – World Economic Forum Annual Meetings at 10:00 (GMT+2);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 17:00 (GMT+2);
• – US FOMC Member Waller Speaks at 18:00 (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 D. Brian Blank, Mississippi State University and Brandy Hadley, Appalachian State University 

Tired of thinking about inflation’s impact on your wallet? You’re not alone. But like it or not, higher prices continue to be an economic and – with the presidential race – a political issue as we enter the early months of 2024.

The Conversation asked two financial economists, D. Brian Blank at Mississippi State University and Appalachian State University’s Brandy Hadley, what they make of the inflation report that dropped on Jan. 11, 2024, and whether there might be a time before too long when we can all stop worrying about increasing costs.

Was inflation higher or lower in December 2023?

Both, unfortunately.

Economists have many ways of measuring how prices change over time. Two key measures are overall, or “headline,” inflation, which tracks the prices for a basket of goods and services, and “core” inflation, which tracks many of the same items but excludes those with unusually jumpy prices, such as gasoline.

In the Bureau of Labor Statistics’ Jan. 11 report, which measured how much prices changed in December 2023, these indicators moved in different directions. In other words, the higher one, core CPI – short for consumer price index – declined from an annual rate of 4% in November to 3.9% in December. And the lower one, headline inflation, rose from 3.1% to 3.4%.

While previously falling prices for clothing, alcohol, new vehicles and gas reversed course in December, core inflation finally fell below 4.0%.

But what does all this inflation confusion mean?

What everyone wants to know is when will inflation go back to normal, or at least closer to the Federal Reserve’s target of 2%. And while no one knows the answer, there are reasons to believe it may happen soon.

At this point, people should be less worried about inflation than they were in December 2022, when the headline figure was 6.4%. While inflation is still higher than we have gotten used to over the past decade, it’s much lower than it has been over the past couple of years.

Hopefully, that indicates the Federal Reserve is approaching the end of its battle with inflation and may be able to finally lower interest rates later this year. Over the past two years, the central bank has raised rates 11 times to tame consumer demand and prices.

But concerns remain about inflation persisting. One risk factor is the impact that conflicts in Ukraine and now the Middle East will have on trade routes, such as those in the Red Sea. Another area of concern may be home prices, which builder KB Homes reports may be rising more this year.

Those worries could lead the Fed to wait just a bit longer to make any big decisions on whether to ease off the brakes any time soon.

So why did headline inflation tick higher?

Overall inflation came in higher than forecasts largely due to the rising price of housing.

Rent accounts for a huge part of inflation, since it’s one of many people’s largest expenses. However, CPI is calculated using rental data over the past year, which means the data lags behind real-time rent changes. What’s more, real estate marketplace Zillow’s estimates of rent are falling – a trend that’s expected to continue as more apartments are built this year.

What matters to people: Prices or inflation?

Even though inflation is slowing, costs are 18% higher than four years ago and aren’t falling, which makes many people less optimistic about the economy than before the pandemic.

Some Wall Street forecasters and economists struggle to understand people’s concerns when labor markets are strong and the stock market is rising. Still, consumer prices are near all-time highs, which is neither exciting for most people nor surprising to economists given that prices typically rise over time.

Despite high expenses, people still have a degree of disposable income. The cost to eat out continues to increase three times as fast as the cost to eat at home, which is both one of the largest differences on record and evidence that people still have income to spend eating out.

That shows the mismatch between consumer behavior and “vibes”: Americans have the money to travel and go to restaurants, but still complain about airfare and menu prices.

When can we stop talking about inflation?

We may have to wait until people stop feeling the inflation impacts before they stop wanting to complain about it – and focus on it – each month. Could the Fed stop the inflation preoccupation by lowering rates? Or does the Fed need to hold rates higher for longer? Only time will tell.

About the Author:

D. Brian Blank, Associate Professor of Finance, Mississippi State University and Brandy Hadley, Associate Professor of Finance and the David A. Thompson Distinguished Scholar of Applied Investments, Appalachian State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) was up by 0.04%, while the S&P 500 Index (US500) was down by 0.07% on Thursday. The NASDAQ Technology Index (US100) closed around its opening price.

The US Consumer Price Index for December rose to 3.4% y/y from 3.1% y/y in November, beating expectations of 3.2% y/y. The core CPI for December declined to 3.9% y/y from 4.0% y/y in November, the lowest reading in 2 years, but above expectations of 3.8% y/y. US weekly initial jobless claims unexpectedly fell by 1,000 to a 2.5-month low of 202,000, indicating a stronger labor market than expectations of a rise to 210,000. Markets are discounting the odds of a 25 bps rate cut to 3% at the next FOMC meeting on January 30-31 and 70% for the same 25 bps rate cut at the March 19-20 meeting.

Today is the start of the Q4 2023 reporting season in the US. The banking sector will start reporting traditionally.

Equity markets in Europe were mostly declining yesterday. Germany’s DAX (DE40) fell by 0.86%, France’s CAC 40 (FR40) lost 0.52% on Thursday, Spain’s IBEX 35 (ES35) was down by 0.62%, and the UK’s FTSE 100 (UK100) closed negative by 0.98%.

ECB Governing Council representative Vujcic said yesterday that December Eurozone inflation was within expectations, and he favors a quarter-point cut in interest rates.

The UK economy grew slightly stronger than expected in November. UK Gross Domestic Product rose by 0.3% in November after falling 0.3% a month earlier. However, weakness in previous months leaves a high risk of sliding into recession, which could be a blow for Prime Minister Rishi Sunak ahead of elections expected in 2024.

Heightened geopolitical risks in the Middle East sent crude oil (WTI) prices up more than 3% after Iran seized an oil tanker off the coast of Oman. The increase in hostile incidents in the Red Sea against commercial shipping is a favorable factor for oil prices. Today, the United States and Britain launched air and sea strikes against Houthi military installations in Yemen in response to the movement’s attacks on ships in the Red Sea.

Natural gas (XNG) prices rose moderately on Thursday after weekly natural gas inventories fell more than expected, according to the EIA. EIA said natural gas inventories fell by 140 billion cubic feet last week, more than the 121 billion cubic feet expected

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 1.77% for the day, China’s FTSE China A50 (CHA50) rose by 0.27%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.27%, and Australia’s ASX 200 (AU200) ended the trading day positive by 0.80%. Japan’s Nikkei index extended its impressive gains this year, jumping 1.5% to another 34-year high on Friday.

China’s inflation data showed that the country’s economic recovery remained weak in December, with the consumer price index falling by 0.3% y/y. However, separate trade data showed exports grew faster than expected last month, and imports returned to growth.

S&P 500 (US500) 4,780.24 −3.21 (−0.07%)

Dow Jones (US30) 37,711.02 +15.29 (+0.04%)

DAX (DE40) 16,547.03 −142.78 (−0.86%)

FTSE 100 (UK100) 7,576.59 −75.17 (−0.98%)

USD Index 102.25 −0.04 (−0.04%)

• – China Consumer Price Index (m/m) at 03:30 (GMT+2);
• – China Producer Price Index (m/m) at 03:30 (GMT+2);
• – China Trade Balance (m/m) at 05:00 (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);
• – UK Trade Balance (m/m) at 09:00 (GMT+2);
• – US Producer Price Index (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

At yesterday’s stock market close, the Dow Jones Index (US30) was up by 0.45%, while the S&P 500 (US500) added 0.57% on Wednesday. The NASDAQ Technology Index (US100) closed positive by 0.75%.

Today, the US will release its monthly consumer price index (CPI) report. The overall CPI is expected to rise from 3.1% to 3.2% year-over-year. At the same time, core CPI, which excludes volatile food and energy prices, will decline from 4% y/y to 3.8% y/y. Lower inflation will increase the likelihood that the Fed will cut interest rates as early as March. In such a scenario, the US dollar will be under pressure, which will give confidence to risky assets (EUR, GBP) as well as indices.

On the contrary, rising inflation will reduce the probability of a rate cut this spring and reduce the number of basis points of rate cuts throughout the year. In such a scenario, the US dollar would gain support, while risk assets, gold, and stock indices would come under pressure. If the data turns out to be mixed (overall inflation rises and core inflation falls), it will only lead to a spike in volatility and will not bring more specificity to the US Fed’s plans. But given that the probability of a rate cut in March fell from 99% to 70% in one week and the fact that the latest US jobs report showed a resilient labor market, a mixed inflation report would be more likely to benefit the US dollar.

The Canadian dollar has been falling steadily against the US dollar over the past few weeks on the back of hawkish statements from Fed Chairman Jerome Powell, as well as a significant drop in global crude oil prices. With oil now finding some support and OPEC+ potentially announcing an extension of voluntary production cuts into next year, the Canadian dollar could strengthen against the US dollar in the short term. However, upcoming US CPI data will be crucial for Fed guidance and could prompt Fed officials to be more hawkish if inflation exceeds expectations.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) added 0.01%, France’s CAC 40 (FR40) fell by 0.01% on Wednesday, Spain’s IBEX 35 (ES35) rose by 0.07%, and the UK’s FTSE 100 (UK100) closed negative by 0.42%.

ECB Executive Board spokesman Schnabel said yesterday that it is too early to discuss rate cuts, and the ECB will keep key rates at restrictive levels until it is confident that inflation will steadily return to the 2% target. For this, additional data confirming the disinflationary process is needed. For his part, ECB Vice President Gindos said that the eurozone may have been in a recession late last year, and incoming data suggest that the future remains uncertain and the outlook is tilted to the downside. Swaps estimate the odds of a 25 bps ECB rate cut at 3% at the next meeting on January 25 and 37% at the March 7 meeting.

Crude oil prices initially jumped on Wednesday after Houthi rebels carried out one of the largest missile and drone attacks on commercial shipping lanes in the Red Sea, potentially disrupting global crude supplies. But crude prices fell in the afternoon after the EIA’s weekly crude stockpile data unexpectedly rose, and gasoline and distillate inventories rose more than expected, pointing to weak energy demand.

Asian markets traded mostly lower yesterday. Japan’s Nikkei 225 (JP225) gained 2.01% for the day, China’s FTSE China A50 (CHA50) fell by 0.30%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.57%, and Australia’s ASX 200 (AU200) ended the trading day negative by 0.69%.

Japan’s Nikkei 225 (JP225) continues to rally after hitting a 34-year-high yesterday. The index rallied on broad-based gains, although technology and auto stocks were the most active. The recent rally in Japanese stocks has been driven mainly by expectations that the Bank of Japan will maintain its ultra-low policy in the near term, especially amid efforts to stimulate the economy following the devastating earthquake in central Japan. Thanks to the Bank of Japan’s soft policy, the Nikkei has become one of the best-performing global equity indices in 2023, jumping 30% year-on-year.

S&P 500 (US500) 4,783.45 +26.95 (+0.57%)

Dow Jones (US30) 37,695.73 +170.57 (+0.45%)

DAX (DE40)  16,689.81 +1.45 (+0.01%)

FTSE 100 (UK100) 7,651.76 −32.20 (−0.42%)

USD Index  102.39 −0.18 (−0.18%)

• – Australia Trade Balance (m/m) at 02:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Consumer Price Index (m/m) 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

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.42%, while the S&P 500 Index (US500) was down by 0.15% on Tuesday. The NASDAQ Technology Index (US100) closed positive by 0.09%.

Lower expectations for a Fed interest rate cut in March weighed on equities as swap markets show that the probability of a 25 bps Fed rate cut at the March 19-20 FOMC meeting fell to 67% from the 100% probability last month.

The US trade deficit unexpectedly narrowed to negative $63.2 billion in November from $64.5 billion in October, which was better than expectations of an increase to negative $64.9 billion and a positive for Q4 GDP. The reduction of the deficit is a positive factor for the strengthening of the national currency.

In November 2023, Canada recorded a trade surplus of CAD 1.6 billion, down significantly from a surplus of CAD 3.2 billion in the previous month and below market expectations of CAD 2 billion. The surplus was driven by a 1.9% increase in imports to CAD 64.2 billion.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) was down by 0.17%, France’s CAC 40 (FR 40) fell by 0.32% on Tuesday, Spain’s IBEX 35 (ES35) lost 1.46%, and the UK’s FTSE 100 (UK100) closed negative by 0.13%.

The Eurozone unemployment rate for November unexpectedly fell to a record low of 6.4%, indicating a stronger labor market. German industrial production for November unexpectedly declined by 0.7% m/m, weaker than expectations of 0.3% m/m. Industrial production declined for the sixth consecutive month. ECB Governing Council representative Centeno said yesterday that good news on Eurozone inflation allows the ECB to cut interest rates sooner than expected.

According to the World Bank, the global economy is experiencing its worst growth rate in 30 years. Global economic growth is projected to slow for the third consecutive year in 2024, falling to 2.4% from 2.6% in 2023, according to the latest World Economic Outlook report released on Tuesday. It also points out that escalating conflicts (Russian invasion of Ukraine, conflict in the Middle East) could have significant implications for energy prices, which could affect both inflation and economic growth.

Asian markets traded yesterday without any unified dynamics. Japan’s Nikkei 225 (JP225) was up by 1.16% for the day, China’s FTSE China A50 (CHA50) was down by 0.46%, Hong Kong’s Hang Seng (HK50) decreased by 0.21%, and Australia’s ASX 200 (AU200) was positive by 0.93%. Japan’s Nikkei 225 (JP225) jumped to a 34-year high on Wednesday amid growing expectations of a delay in the Bank of Japan’s policy tightening plans.

Japanese household spending fell by 2.9% y/y in November, weaker than expectations of 2.3% y/y and marking the ninth consecutive month of spending declines. Tokyo’s Consumer Price Index for the decade fell to 2.4% y/y from 2.7% y/y in November, better than expectations of 2.5% y/y and the slowest rate of increase in 1.5 years, dovish for BOJ policy.

In Australia, the monthly consumer price index (CPI) came in at 4.3% y/y in November, the slowest pace since January 2022. This is down from October’s 4.9% reading and below market forecasts of 4.4%. If the fourth quarter inflation report due out at the end of January paints a similar picture for consumer prices, markets may move expectations for the first-rate cut by the Reserve Bank of Australia (RBA) in June since August this year.

S&P 500 (US500) 4,756.50 −7.04 (−0.15%)

Dow Jones (US30) 37,525.16 −157.85 (−0.42%)

DAX (DE40)  16,688.36 −28.11 (−0.17%)

FTSE 100 (UK100) 7,683.96 −10.23 (−0.13%)

USD Index  102.53 +0.32 (+0.31%)

• – Australia Consumer Price Index (m/m) at 02:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 16:15 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – US FOMC Member Williams Speaks (m/m) at 22:15 (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

At the stock market close yesterday, the Dow Jones Index (US30) was up by 0.58%, while the S&P 500 Index (US500) added 1.41% on Monday. The NASDAQ Technology Index (US100) closed positive by 2.20% yesterday. Nvidia stock’s (NVDA) rise to a record high led to gains in technology stocks, which also had a positive impact on the overall market. On Monday, stocks also received support from lower bond yields amid comments from Federal Reserve President of Dallas, Logan, who said that the Fed may slow the pace of its asset portfolio reductions to maintain sufficient liquidity in financial markets.

Atlanta Fed President Bostic said yesterday he is comfortable with the US Fed’s restrictive stance. Bostic wants to see the economy continue to grow and inflation reach our 2% level. He added that he expects the Fed’s first-rate cut in the third quarter of this year.

Nvidia (NVDA) closed at a record high (+6%) after it unveiled new graphics chips at CES with additional components that will allow users to better utilize artificial intelligence on their personal machines without having to rely on remote services available over the internet. Quotes of Advanced Micro Devices (AMD) are up more than 5% after Melius Research LLC upgraded the stock to “buy” from “hold” with a $188 price target. Boeing (BA) stock price fell more than 8%, topping the S&P 500 and Dow Jones Industrials losers list, after the company took its 737 Max 9 jet out of service for inspections after a section of the fuselage of a new Alaska Airlines plane burst during flight. United Airlines said Monday that during inspections, it found loose bolts and other parts on the 737 Max 9’s plug doors.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.74%, France’s CAC 40 (FR40) gained 0.40% on Monday, Spain’s IBEX 35 (ES35) jumped by 0.44%, and the UK’s FTSE 100 (UK100) closed positive by 0.06%.

ECB Governing Council spokesman Vujcic said yesterday that he expects inflation to slow gradually and that the ECB is not talking about cutting interest rates now and probably won’t do so until the summer.

Eurozone Dec economic confidence indicator rose by 2.4 to an 8-month high of 96.4, exceeding expectations of 94.2. German trade news was better than expected: November exports rose by 3.7% m/m, stronger than expectations of 0.5% m/m and the biggest increase in 2 years. In addition, November imports rose by 1.9% m/m, stronger than expectations of 0.4% m/m and the largest increase in 9 months.

Silver prices came under pressure yesterday after German factory orders rose less than expected, indicating weak demand for industrial metals. Silver is highly correlated to gold, and gold is now under pressure as the US Federal Reserve and ECB do not seem to be planning to cut rates this spring as economists expect.

Crude oil and gasoline prices fell sharply on Monday, with gasoline prices falling to their lowest in 3 weeks. Concerns about worsening global oil demand drove crude prices lower after Saudi Arabia cut the official selling prices of its crude to all buyers. Oil prices also fell on a ShippingWatch report that some shipping companies have struck a deal with Houthi rebels to allow their ships to pass safely through the Red Sea, which could reduce supply disruptions.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) gained 0.27% for the day, China’s FTSE China A50 (CHA50) fell by 1.14%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.88%, and Australia’s ASX 200 (AU200) ended the trading day negative by 0.50%.

Chinese authorities said they plan to reduce the amount of money banks must set aside in reserves to stimulate lending. The Central Bank will also strengthen counter-cyclical and inter-cyclical policy adjustments to create a favorable financial environment for the country’s economic growth. Traders are raising bets on further monetary easing this year as a weak economic recovery forces authorities to cut interest rates and provide ample liquidity.

The Bank of Japan (BoJ) said it will cut its monthly purchases of ultra-long government bonds, a reminder that it may still go for a reduction in stimulus to the economy this year. Market bets indicate traders still expect the Bank of Japan to end its negative interest rate policy later this year, although speculation that it will do so this month has largely subsided. Data released on Tuesday showed that consumer price growth in Tokyo slowed for a second month in December, which also eased pressure on the BOJ. Currently, overnight index swaps indicate that the Central Bank will end its negative rate policy in July this year, although as recently as two weeks ago, it was supposed to happen in April.

S&P 500 (US500) 4,763.54 +66.30 (+1.41%)

Dow Jones (US30) 37,683.01 +216.90 (+0.58%)

DAX (DE40)  16,716.47 +122.26 (+0.74%)

FTSE 100 (UK100) 7,694.19 +4.58 (+0.060%)

USD Index  102.24 −0.17 (−0.16%)

• – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
• – Australia Retail Sales (m/m) at 02:30 (GMT+2);
• – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
• – German Industrial Production (m/m) at 09:00 (GMT+2);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
• – US Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada Trade Balance (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.