InvestMacro

By JustMarkets

At Tuesday’s stock market close, the Dow Jones Index (US30) decreased by 0.25%. The S&P 500 Index (US500) added 0.25%. The NASDAQ Technology Index (US100) closed the day positively by 0.37%.

Hawkish comments from the Fed supported the dollar and had a limited impact on the indices. Fed spokeswoman Bowman said that inflation will continue to decline if interest rates remain at current levels, but “it is not yet time” to start cutting rates. Kansas City Fed President Schmid also said: “With inflation running above target, labor markets tight, and demand showing considerable momentum, my view is that there is no need to preemptively adjust the stance of monetary policy.”

Strong earnings support equities: data from Bloomberg Intelligence showed that Q4 earnings for companies reporting on the S&P 500 rose 7.7% year-over-year, well above forecast (1.2%) and the highest since Q4 2021. About 90% of S&P 500 companies have reported so far.

Equity markets in Europe traded flat on Tuesday. German DAX (DE40) rose by 0.76%, French CAC 40 (FR40) gained 0.23% yesterday, Spanish IBEX 35 (ES35) declined 0.24%, and British FTSE 100 (UK100) closed negative 0.02%. Key economic data for Europe will be released later this week.

WTI crude oil prices fell to $78.5 per barrel on Wednesday, retreating slightly from a one-month high as part of a likely technical correction. At the same time, investors continued to evaluate various supply and demand factors. Oil prices have gained around 3% over the past two sessions amid ongoing geopolitical risks in the Middle East and signs of a strengthening US physical market. The outcome of ceasefire talks between Israel and Hamas remains highly uncertain, while Houthi rebels in Yemen continue to disrupt shipping in the Red Sea, and there are also reports of attacks on telecommunications cables that lie at the bottom of the Red Sea. Investors are awaiting OPEC’s March decision to extend production cuts next quarter. According to preliminary reports, OPEC+ will consider extending voluntary oil production cuts in the second quarter and may extend them until the end of the year. This would be a bullish signal for oil.

We continue to watch the natural gas market. Producers’ efforts to combat oversupply by cutting production support the price, with companies such as Chesapeake Energy cutting their 2024 production plans by about 30%. Other industry leaders, including Antero Resources, Comstock Resources, and EQT, have also reduced drilling and production in response to market conditions. Natural gas prices rose to $1.8/MMBtu yesterday.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.06% yesterday, China’s FTSE China A50 (CHA50) jumped by 0.75% on Tuesday, Hong Kong’s Hang Seng (HK50) gained 1.09% on the day, and Australia’s ASX 200 (AU200) ended yesterday positive 0.57%.

On Wednesday, the Shanghai Composite Index settled at its highest level in almost three months as Beijing took a series of policy measures to support the stock market, boosting investor confidence. Investors are also looking ahead to the National People’s Congress, which begins on March 5, for signs of further policy support from the authorities. Meanwhile, investors are on edge as Hong Kong is due to announce its 2024 budget today amid a fragile economic turnaround amid a shaky recovery in China and lingering geopolitical tensions.

The Australian dollar fell to $0.652, hitting its lowest level in a week, as investors reacted to softer-than-expected inflation data in the country. The data showed that Australia’s consumer price index (CPI) remained at a two-year low of 3.4% y/y in January, unchanged from December and below forecasts of 3.6% y/y. Last week, minutes from the latest RBA meeting showed that policymakers discussed the possibility of further rate hikes at the February meeting. Still, they ultimately decided to maintain current monetary parameters, given signs of moderate inflation.

The New Zealand dollar slid to $0.61, hitting its lowest level in almost two weeks, as the Reserve Bank of New Zealand (RBNZ) kept interest rates unchanged and offered a less hawkish view on monetary policy than the market expected. The RBNZ kept the cash rate unchanged for the fifth consecutive meeting at 5.5%. The central bank noted the progress in containing inflation and lowered its forecast for rates to peak at 5.6% from 5.7%. However, the committee still expects monetary easing to begin in mid-2025. Markets have now lowered bets on a May rate hike to 20% from nearly 50% before the latest decision. Last week, RBNZ head Adrian Orr said there was still work to bring core inflation down but acknowledged the risks of excessive policy tightening.

S&P 500 (US500)  5,078.18 +8.65 (+0.17%)

Dow Jones (US30) 38,972.41 −96.82 (−0.25%)

DAX (DE40)  17,556.49 +133.26 (+0.76%)

FTSE 100 (UK100) 7,683.02 −1.28 (−0.017%)

USD Index  103.94 +0.11 (+0.11%)

• – Australia Consumer Price Index (m/m) at 02:30 (GMT+2);
• – New Zealand RBNZ Interest Rate Decision at 03:00 (GMT+2);
• – New Zealand RBNZ Monetary Policy Statement at 03:00 (GMT+2);
• – New Zealand RBNZ Press Conference at 04:00 (GMT+2);
• – US GDP (q/q) at 15:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – US FOMC Member Bostic Speaks at 19:00 (GMT+2);
• – US FOMC Member Mester Williams at 19:45 (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

On Monday, stock indices gave up early gains and closed lower, consolidating below last week’s record highs. At Monday’s stock market close, the Dow Jones Index (US30) was down 0.16%. The S&P 500 Index (US500) decreased by 0.38%. The NASDAQ Technology Index (US100) closed the day negative 0.13%. Supply-side pressure pushed bond yields higher on Monday and was bearish for stocks.

In extended trading, Zoom Video (ZM) shares jumped by 10% after beating revenue and earnings expectations, while Unity Software fell by 18% after reporting weak financial guidance.

This week, investor attention is focused on PCE inflation data and Federal Reserve speeches. PCE and core inflation are expected to show a small monthly increase, but the annual rate is expected to slow. In addition, the second estimate of US GDP growth for Q4 will be released.

Equity markets in Europe traded flat on Monday. German DAX (DE40) rose by 0.02%, French CAC 40 (FR40) fell by 0.46% yesterday, Spanish IBEX 35 (ES35) rose by 0.08%, and British FTSE 100 (UK100) closed negative by 0.29%.

Speaking at the European Parliament, ECB President Christine Lagarde said that the current disinflation process should continue at a pace that could lead to the first rate cut by June, although some favor an earlier approach. Money markets have also reassessed their expectations for the first rate cut by the US Fed from May to June. With the ECB generally following the US Fed’s lead, investors should not expect the first rate cut from the ECB until summer.

Silver retreated yesterday amid the negative impact of iron ore prices falling to a 4-month low on Monday on concerns about Chinese demand for industrial metals.

WTI crude futures are holding above $77 a barrel on Tuesday after jumping more than 1% in the previous session, helped by ongoing supply disruptions that have raised supply concerns. Houthi rebels in Yemen continued attacks on Red Sea vessels, driving up freight costs and delaying deliveries. Meanwhile, in the United States, analysts noted strong demand from refineries, benefiting from high margins. Refineries with high profit margins buy more barrels, and foreign buyers favor US crude to avoid Red Sea transportation problems.

Natural gas prices rose moderately on Monday thanks to some coverage of short positions by funds ahead of Tuesday’s March futures contract expiration. Also, it was reported last week that major shale gas producers will cut production due to extremely low prices, and Chesapeake Energy will be the first to do so. The low prices result from weak demand, so producers are beginning to take action to stop the drop in natural gas prices. Seasonally, natural gas has a positive March-April performance, so there is plenty of upside for prices in the coming weeks.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 0.35% yesterday, China’s FTSE China A50 (CHA50) declined 1.64% on Monday, Hong Kong’s Hang Seng (HK50) ended the day down 0.54%, and Australia’s ASX 200 (AU200) closed positive 0.12%.

Japan’s core consumer price index, which excludes fresh food but includes the cost of fuel, was 2% in January 2024, slowing from 2.3% in December and the lowest since March 2022. Still, the January figure was above market forecasts of 1.8%. Japan’s core inflation is now within the central bank’s 2% target. This eases pressure on the BoJ to raise interest rates after months of speculation that rising wages and prices would force it to do so. The BoJ’s ultra-confident stance has been a key fulcrum for Japanese markets in the past year as rising interest rates in the rest of the world and a weakening yen have sent foreign investors rushing into local equities.

While additional stimulus measures from Beijing helped Chinese markets bounce off multi-year lows, markets are now waiting for signs of real improvement in the economy. Purchasing managers’ index data for February is due out later this week and is expected to provide clearer signals on the health of Asia’s largest economy.

S&P 500 (US500) 5,069.53 −19.27 (−0.38%)

Dow Jones (US30) 39,069.23 −62.30 (−0.16%)

DAX (DE40)  17,423.23 +3.90 (+0.022%)

FTSE 100 (UK100) 7,684.30 −21.98 (−0.29%)

USD Index  103.78 −0.16 (−0.15%)

• – Japan National Core CPI (m/m) at 01:30 (GMT+2);
• – German GfK Consumer Confidence (m/m) at 09:00 (GMT+2);
• – US Durable Goods Orders (m/m) at 15:30 (GMT+2);
• – US CB Consumer Confidence (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

At Friday’s close of the stock exchange, the Dow Jones Index (US30) rose by 0.16% (for the week 0.98%). The S&P 500 Index (US500) was up 0.04% (up 1.15% for the week). The NASDAQ Technology Index (US100) closed negative 0.28% (for the week 0.54%). All 3 indices set new all-time highs on Friday. However, after this week’s sharp rally in technology stocks, there was profit-taking in technology stocks, which led to the NASDAQ (US100) Index being in negative territory.

On Friday, the US dollar index posted its first weekly decline in 2024 as investors took a break from buying the currency after a nearly two-month rally built on expectations that the Federal Reserve would begin cutting rates later than previously thought. Investors shifted expectations for the Fed’s first rate cut to June rather than May, significantly reducing the extent of prime rate cuts by the US Central Bank. But, if the US economy remains as strong as it is, the Fed may not be able to go for a rate cut in June. According to analysts at Bank of America (BofA), it is not yet time to sell the dollar, but it will start to weaken in the second quarter, assuming the Fed cuts rates in June and continues to cut rates quarterly. This will cause the euro to strengthen to 1.15 against the US dollar by the end of the year.

New York Fed President Williams said Friday he expects consumer spending growth to slow this year. At some point, it will be appropriate for the Fed to back off from restrictive monetary policy, likely later this year.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.28% (week-to-date 2.01%), France’s CAC 40 (FR40) gained 0.70% on Friday (week-to-date 2.89%), Spain’s IBEX 35 (ES35) declined 0.08% on Friday (week-to-date 2.49%), and the UK’s FTSE 100 (UK100) closed positive 0.28% (week-to-date -0.07%).

Frankfurt’s DAX (DE40) and France’s CAC 40 (FR40) rose to new record highs on Friday as investors welcomed dovish remarks from ECB officials. ECB official Centeno said the central bank should remain open to the possibility of a rate cut as early as March, while his counterpart Schnabel expressed confidence that inflation expectations are under control.

On Friday, a survey showed business activity in Germany improved in February, but probably not enough to prevent Europe’s largest economy from sliding into another recession. ECB President Christine Lagarde on Friday called relatively favorable fourth-quarter wage growth data encouraging but not enough for the European Central Bank to be confident that inflation has been beaten.

Markets are now pricing in a similar trajectory of future interest rate cuts for the US and Eurozone, forecasting just over three 25 basis point cuts this year. However, Europe is not in the same enviable position as the US. The world’s largest economy has beaten growth expectations, maintains a tight labor market, and consumers appear healthy at first glance. On the other hand, Europe has narrowly avoided a technical recession several times already, escaping with only minimal losses as quarterly GDP growth hovered around zero. Bundesbank chief Joachim Nagel cited that the ECB will receive key price data in the second quarter, cementing expectations of a possible rate cut around mid-year. Earlier on Friday, Robert Holzmann confirmed that the ECB usually follows the Fed regarding the timing of rate adjustments, further weakening bets on a rate cut.

Wednesday and Thursday this week will be G20 meetings, which could indirectly impact financial markets. The sessions are held behind closed doors, but many participants talk to the press between meetings. As this body directly sets interest rate policy, news from here could cause increased volatility.

Crude oil and gasoline prices fell on Friday on concerns about energy demand in China. According to RBC Capital Markets, China’s domestic oil demand has been weak, and limited stimulus measures from the government have disappointed. Oil was also pressured by signs that Israel will join peace talks in Paris, which could reduce some geopolitical risks in the Middle East.

US natural gas prices fell over 6% to $1.6 per bbl on Friday, they were driven by oversupply, ample storage, and lower heating demand amid a mild winter. The mild weather has pushed inventories well above average, with the latest EIA data showing inventories 22.3% above the seasonal norm.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) jumped by 1.51% for the week, China’s FTSE China A50 (CHA50) gained 2.44% last week, Hong Kong’s Hang Seng (HK50) ended the week up 2.40%, and Australia’s ASX 200 (AU200) ended the week negative 0.19%.

According to analysts, if the annual compensation negotiations between major Japanese companies and labor unions, due to conclude in mid-March, result in wage growth of 4.0%, BoJ policymakers may gain confidence in the sustainability of wage growth to pull the trigger and move away from negative rates finally.

S&P 500 (US500) 5,088.80 +1.77 (+0.04%)

Dow Jones (US30) 39,131.53 +62.42 (+0.16%)

DAX (DE40)  17,419.33 +48.88 (+0.28%)

FTSE 100 (UK100) 7,706.28 +21.79 (+0.28%)

USD Index  103.96 0.0 (0.0%)

• – US New Home Sales (m/m) at 17:00 (GMT+2);
• – US Eurozone ECB President Lagarde Speaks (m/m) 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.