InvestMacro

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.

By JustMarkets 

At Friday’s close, the Dow Jones Index (US30) was up by 0.07% (-0.67% for the week), while the S&P 500 Index (US500) was up by 0.18% (-1.86% for the week). The NASDAQ Technology Index (US100) closed positive by 0.09% (-3.83% for the week).

The dollar rose to a 3-week high on Friday morning after a stronger-than-expected US December payrolls report dampened expectations that the Federal Reserve will soon cut interest rates. However, the dollar gave up mid-day and moved to the downside after the ISM Services Business Activity Index for December in the US came in weaker than expected. US nonfarm payrolls for the decade rose by 216,000, exceeding expectations of 175,000. The unemployment rate for December was unchanged at 3.7%, which was stronger than expectations for an increase to 3.8%. The US average hourly earnings for the decade rose by 0.4% m/m and 4.1% y/y, stronger than expectations of 0.3% m/m and 3.9% y/y. The US ISM Services Business Activity Index for the decade fell by 2.1 to a 7-month low of 50.6, weaker than expectations of 52.5. Also boosting stocks were dovish comments from FRB President Richmond Barkin on Friday, when he said he was not opposed to lowering interest rates as the economy normalizes and confidence grows that inflation will fall.

Statistics Canada showed Friday that labor productivity — a broad measure of real gross domestic product per number of hours worked in the economy — has declined in the country for six consecutive quarters. Economists say the measure is critical to improving Canada’s quality of life, and the decline will be of particular concern to the Bank of Canada (BoC), which will determine what benchmark interest rate to set next. While productivity has stalled, Friday’s jobs report shows average hourly earnings accelerated to 5.4% year-over-year in December. Bank policy makers note that average hourly earnings growth in the 4% to 5% range falls short of the 2% inflation target.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.14% (-0.09% for the week), France’s CAC 40 (FR40) lost 0.40% (-1.89% for the week) on Friday, Spain’s IBEX 35 (ES35) fell by 0.18% (+0.46% for the week) on Friday, and the UK’s FTSE 100 (UK100) closed negative by 0.43% (-0.43% for the week). The Euro Stoxx 50 Index (EU50) fell to a one-month low on Friday, and European government bond yields rose to 3-week highs after the Eurozone’s December consumer price index accelerated from November, reducing the ECB’s chances of easing monetary policy.

Goldman Sachs Group Inc. and Bloomberg Economics raised their growth forecasts for the United Kingdom, giving hope to the economy as the economic outlook improves even as floods and strikes shake the country. In the markets, analysts have raised their forecasts for sterling, with investors recently turning bullish on the currency for the first time in three months. Some are also seeing signs of a reversal in equities on the back of stronger retail sales figures.

German retail sales for November fell by 2.5% m/m, weaker than expectations of 0.5% m/m and the biggest decline in 19 months. Germany is the economic engine of Europe, so if the German economy is struggling, it is likely that the rest of the EU is too. However, German manufacturing PMI data — although still in deep negative territory — showed signs of improvement, rebounding from a low of 38.8. The ZEW economic sentiment index, which measures experts’ views on the direction of the European economy over the next six months, also rose from its pessimistic low of September 2023.

As transportation corporations divert ships away from the Red Sea, retailers face the biggest upheaval in shipping since COVID-19 threatened the freight industry in 2020. As a result, Western retailers may wait longer for goods to arrive from China, and shortages will drive up prices. The British Retail Consortium said the rising costs could reverse the trend of lower food price inflation. It could also affect energy supplies to Europe.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) fell by 0.93%, China’s FTSE China A50 (CHA50) lost 2.73% over five trading days, Hong Kong’s Hang Seng (HK50) ended the week down by 3.11%, and Australia’s ASX 200 (AU200) ended the week negative by 1.32%.

On Friday, the People’s Bank of China (PBoC) said it will strive to maintain buoyant financial activity and expand financial openness this year to support economic growth and high-quality development effectively. The PBoC will deepen financial market opening by facilitating foreign investors’ participation in China’s bond market, the statement added. In addition, efforts will be made to strengthen the interconnectivity of domestic and overseas financial infrastructure, participate in the formulation of rules for international trade involving the financial sector, and further improve the policy system to facilitate the cross-border use of the yuan.

S&P 500 (US500) 4,697.24 +8.56 (+0.18%)

Dow Jones (US30) 37,466.11 +25.77 (+0.07%)

DAX (DE40)  16,594.21 −23.08 (−0.14%%)

FTSE 100 (UK100) 7,689.61 −33.46 (−0.43%)

USD Index  102.44 +0.01 (+0.01%)

• – German Trade Balance (m/m) at 09:00 (GMT+2);
• – Switzerland Retail Sales (m/m) at 09:30 (GMT+2);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• – US FOMC Member Bostic Speaks (m/m) at 19:00 (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

As of Thursday’s stock market close, the Dow Jones (US30) index added 0.03%, while the S&P 500 (US500) index fell by 0.34% yesterday. The NASDAQ Technology Index (US100) closed at a negative 0.56% on Thursday. Interest rate-sensitive technology stocks came under pressure yesterday after better-than-expected US labor market reports pushed bond yields up and lowered expectations for a Fed interest rate cut.

Weekly initial jobless claims fell by 18,000 to a 2-month low of 202,000, indicating a stronger labor market than expected at 216,000. In addition, the December employment change from ADP rose by 164,000, indicating a more robust labor market than expectations of 125,000 and the largest increase in 4 months. Markets estimate the odds of a 25bp rate cut at the next FOMC meeting on January 30-31 at 7% and at the March 19-20 meeting at 70%.

Canada’s manufacturing PMI declined in the second quarter of 2020 at the sharpest pace since the pandemic, limiting the central bank’s (BoC) ability to fight inflation with restrictive policy. Meanwhile, concerns over weaker global oil demand dampened foreign exchange inflows, robbing the Canadian currency of support.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.48%, France’s CAC 40 (FR40) gained 0.52% yesterday, Spain’s IBEX 35 (ES35) added 1.28% yesterday, and the UK’s FTSE 100 (UK100) closed at a positive 0.53%.

Germany and France saw a slight increase in inflation, mainly due to higher energy prices, which coincided with market forecasts. In other economic news, the Eurozone PMI showed a seventh consecutive month of contraction in private sector activity, albeit at a slower pace than originally forecast.

The latest business activity data confirmed that the UK economy remains resilient to high interest rates. UK consumer borrowing increased by £2.0 billion in November, the highest level since March 2017 and exceeding the expected £1.4 billion increase. In addition, home purchase loans totaled 50.1k, which also exceeded forecasts. Finally, the final PMI showed that UK services output rose more strongly in December than originally anticipated, with optimism hitting a seven-month high.

Crude oil and gasoline prices moved to the downside as crude inventories unexpectedly rose in the EIA’s weekly report on Thursday, suggesting weak energy demand in the US.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) was down by 0.53%, China’s FTSE China A50 (CHA50) decreased by 0.84% yesterday, Hong Kong’s Hang Seng (HK50) closed near its opening price, and Australia’s ASX 200 (AU200) was at a negative 0.39% on the day.

Chinese markets continue to underperform. Concerns about China weighed on Asian markets after ratings agency Fitch downgraded the country’s four largest state-owned asset managers on Thursday.

The offshore yuan slipped to 7.15 per dollar, falling to its lowest level in three weeks, facing pressure from a strengthening dollar as traders cut aggressive bets on the US Federal Reserve interest rate cut this year. Earlier in the week, the yuan also came under pressure after official data showed that activity in China’s manufacturing sector contracted further in December. This reinforced bets that the People’s Bank of China (PBoC) may ease policy further this year to support the fragile and uneven economic recovery. Markets expect a cut in key lending rates and another reduction in reserve requirement ratios in the first half of this year.

S&P 500 (US500) 4,688.68 −16.13 (−0.34%)

Dow Jones (US30) 37,440.34 +10.15 (+0.03%)

DAX (DE40)  16,617.29 +78.90 (+0.48%)

FTSE 100 (UK100) 7,723.07 +40.74 (+0.53%)

USD Index  102.40 −0.09 (−0.09%)

• – Japan Services PMI (m/m) at 02:30 (GMT+2);
• – German Retail Sales (m/m) at 09:00 (GMT+2);
• – Switzerland Retail Sales (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);
• – Eurozone Consumer Price Index (m/m) at 12:00 (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);
• – Canada Ivey PMI (m/m) at 17:00 (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.

By JustMarkets

As of Wednesday’s stock market close, the Dow Jones (US30) index decreased by 0.76%, while the S&P 500 (US500) index was down by 0.80% yesterday. The NASDAQ Technology Index (US100) closed negative by 1.18% on Wednesday. The S&P 500 Index (US500) fell to a 2-week low, the Dow Jones Index (US30) fell to a one-week low, and the NASDAQ Index (US100) fell to a 3-week low.

The minutes of the December 12-13 FOMC meeting did not indicate an imminent Fed rate cut and provided support for the dollar. The minutes also showed that policymakers agreed that it is appropriate to maintain a restrictive policy for some time until inflation begins to decline steadily. Markets estimate the odds of a -25bp rate cut at the next FOMC meeting on January 30-31 at 9% and at the next meeting on March 19-20 at 77% (down from 99% a week ago).

US economic news was mixed yesterday: activity in the US manufacturing sector was stronger than expected last month, but US job openings unexpectedly fell in November. The US ISM manufacturing index for the decade rose by 0.7 to 47.4, beating expectations of 47.1. The number of open job openings in the US for November unexpectedly fell by 62,000 to a 2-year low of 8.790 million, indicating a weaker labor market than expectations of a rise to 8.821 million.

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) fell by 1.38%, the French CAC 40 (FR40) lost 1.58% yesterday, the Spanish IBEX 35 (ES35) decreased by 1.26% yesterday, and the British FTSE 100 (UK100) closed negative by 0.51%.

Inflation statistics for the Eurozone are expected to be released this week, following data from Germany today. Inflation is forecast to rise to 3% year-on-year in December, up from 2.4% in the previous month. This would be the highest reading in three months and the biggest rise in a single month since October 2022. Nevertheless, markets are questioning the ECB’s hawkish appetite. The policy rate has continued to move downward since the December meeting. Analysts expect the first 25 basis points (bps) rate cut to come no later than April.

Saudi Arabia officially joins the BRICS bloc. Prince Faisal bin Farhan said the BRICS group is a beneficial and important channel to strengthen economic cooperation. Previously, the BRICS bloc included Brazil, Russia, India, China, and South Africa. Still, it will now double as the United Arab Emirates, Egypt, Iran, and Ethiopia will join along with Saudi Arabia. Pakistan has also applied to join BRICS. Saudi Arabia’s biggest oil consumer, China, has led calls for BRIC expansion to become a counterweight to the West.

Crude oil prices jumped on Wednesday on concerns about dwindling global oil supplies after Libya said it was shutting down its Sharara oil field after protesters stormed the facility. The Sharara oil field is Libya’s largest and pumps about 300,000 barrels per day.

Iran’s dispatch of a warship to the Red Sea is the boldest move it has made to challenge US forces on a key trade route, emboldening Houthi militants whose attacks have disrupted shipping over the past two months. Tehran is unlikely to want a direct confrontation—its old frigate is no match for the US-led maritime task forces patrolling the waters off Yemen, but it takes the projection of Iranian power in the region to a new level and heightens tensions in the Middle East.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) was not trading due to holidays, China’s FTSE China A50 (CHA50) was down by 1.67% yesterday, Hong Kong’s Hang Seng (HK50) fell by 0.85% by Wednesday’s close, and Australia’s ASX 200 (AU200) was negative by 1.37% for the day.

Fitch downgraded four Chinese state-owned asset managers by one notch and placed three of the four companies under surveillance for further potential downgrades. The rating agency cited growing pressure on the four companies due to the ongoing downturn in the real estate market and increased uncertainty about the government’s ability to support the asset managers’ finances. This, in turn, has led to uncertainty over the ability of state-owned companies to buy back non-performing assets on the open market, which is weighing unfavorably on China’s financial markets. At the same time, Taiwan should benefit from the semiconductor sector’s recovery from a severe downturn in 2023.

S&P 500 (US500) 4,704.81 −38.02 (−0.80%)

Dow Jones (US30) 37,430.19 −284.85 (−0.76%)

DAX (DE40)  16,538.39 −230.97 (−1.38%)

FTSE 100 (UK100) 7,682.33 −39.19 (−0.51%)

USD Index  102.51 +0.31 (+0.30%)

• – Australia Services PMI (m/m) at 00:00 (GMT+2);
• – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
• – China Caixin Services PMI (m/m) at 03:45 (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);
• – German Consumer Price Index (m/m) at 15:00 (GMT+2);
• – US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Services PMI (m/m) at 16:45 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• – US Crude Oil Reserves (w/w) 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.