InvestMacro

By JustMarkets

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

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

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

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

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

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

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

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

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

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

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

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

DAX (DE40) 115,327.64 +22.62 (+0.15%)

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

USD Index 104.42 −0.45 (−0.43%)

• – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
• – Japan Unemployment Rate (m/m) at 01:30 (GMT+2);
• – Japan Services PMI (m/m) at 01:30 (GMT+2);
• – German Services PMI (m/m) at 10:55 (GMT+2);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Producer Price Index (m/m) at 12:00 (GMT+2);
• – Canada Building Permits (m/m) at 15:30 (GMT+2);
• – US ISM Services PMI (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

According to ISM, the US Manufacturing Activity Index rose from 47.4 to 47.7 in February, slightly below expectations of 48.0. To understand what this index shows – any value above 50 signals growth in the sector, while values below this threshold indicate a contraction. The US manufacturing activity index has remained in falling territory for the fourth consecutive month, a sign that the economic outlook is challenging amid persistently high inflation and rapidly rising interest rates. While the manufacturing sector has been in recession since last November, the jump in prices suggests that inflation is likely to remain resilient in the coming months, raising the risk that the Fed could raise its final rate in its efforts to restore price stability. That could mean a 50 basis point interest rate hike at the March FOMC meeting, which would be a bullish catalyst for the US dollar and a bearish catalyst for stock indices.

As the stock market closed Tuesday, the Dow Jones Index (US30) increased by 0.02%, while the S&P 500 Index (US500) fell by 0.47%. The NASDAQ Technology Index (US100) closed negative by 0.66%.

Rafael Bostic, president of the Federal Reserve Bank of Atlanta, called for further interest rate hikes above 5% to get inflation back to the Central Bank’s target level. “I think we will need to raise the federal funds rate to 5-5.25% and leave it at that level until 2024,” Bostick said. Fed funds futures show that the final rate will reach the 5.5%-5.75% range by September 2023. Monthly labor market data and consumer price data in the coming days will help investors gauge the trajectory of rates ahead of the March 21-22 meeting.

Equity markets in Europe mostly fell yesterday. German DAX (DE30) decreased by 0.39%, French CAC 40 (FR40) fell by 0.46%, Spanish IBEX 35 (ES35) lost 0.82%, and British FTSE 100 (UK100) closed on the plus side by 0.49%.

The annual inflation rate in Germany remained at 8.7%, the same level as in January, according to the federal statistical agency Destatis. Pressure on prices also remains in other leading eurozone economies. Eurostat will release Eurozone inflation data today. Analysts forecast that overall inflation will fall from 8.6% to 8.3%, while core inflation will remain at an annualized rate of 5.3%.

Bank of France Governor François Villeroy de Galleau said Wednesday in Paris that the ECB’s final rate should be reached no later than September. At the moment, the ECB’s final rate is expected to be 4.0%. Since yesterday, the ECB has started to reduce its balance sheet by an average of 15 billion euros a month. At the same time, Bundesbank President Nagel called for accelerating the pace of balance sheet reduction in the second half of the year.

British Prime Minister Rishi Sunak reached an agreement with the European Union on the status of Northern Ireland, which is expected to open more trade after Brexit between the EU and the United Kingdom.

Oil rises as record US oil exports offset rising inventories. The US crude exports reached a record 5.629 million barrels, with crude inventories up 1.2 million barrels in the last week. Another factor that supported oil price sentiment was China’s production data, which came in above expectations for January and served as an indicator of energy demand from the world’s largest crude oil importer.

Asian markets were rising yesterday. Japan’s Nikkei 225 (JP225) gained 0.26% on the day, China’s FTSE China A50 (CHA50) gained 1.36%, Hong Kong’s Hang Seng (HK50) jumped by 4.21% on the day, India’s NIFTY 50 (IND50) added 0.85%, and Australia’s S&P/ASX 200 (AU200) was positive by 0.09%.

China’s industrial sectors, as well as the service sector, are showing steady growth, which gives hope that the significant lifting of Covid restrictions has seriously boosted China’s economic move.

S&P 500 (F) (US500) 3,951.39 −18.76 (−0.47%)

Dow Jones (US30)32,661.84 +5.14 (+0.016%)

DAX (DE40) 15,305.02 −60.12 (−0.39%)

FTSE 100 (UK100) 7,914.93 +38.65 (+0.49%)

USD Index 104.42 −0.45 (−0.43%)

• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
• – Eurozone ECB Monetary Policy Statement (m/m) at 14:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• – US FOMC member Waller Speaks at 23:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

The US CB consumer confidence index declined for the second month in a row, a sign that Americans are becoming more pessimistic about economic prospects amid persistently high inflation and rapidly rising interest rates. Looking at the individual components of the report, the current situation index, based on business and labor market assessments, rose to 152.8 from 151.1. Still, the expectation indicator, which tracks short-term income prospects, the business environment, and job opportunities, fell sharply to 69.7 from 76.00. Over the past few weeks, markets have overestimated the Fed’s monetary policy outlook upward because of solid economic data, but expectations could soon change if falling confidence causes a significant decline in consumer spending.

As the stock market closed on Tuesday, the Dow Jones Index (US30) decreased by 0.71%, and the S&P 500 Index (US500) lost 0.30%. NASDAQ Technology Index (US100) closed negative by 0.10%. Economists say the US stock indices seem overvalued based on current rates. Therefore, the path of least resistance is likely to be further reductions. Monetary policy operates with a long and variable lag, so the outlook may continue to deteriorate as the Fed’s cumulative tightening affects the real economy.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE30) decreased by 0.11%, France’s CAC 40 (FR40) lost 0.38%, Spain’s IBEX 35 (ES35) added 0.90%, Britain’s FTSE 100 (UK100) closed down by 0.74%.

The latest data showed that inflation in Europe is starting to accelerate again. In France, the consumer price index rose from 6% to 6.2% y/y. In Spain, CPI also jumped from 5.9% to 6.1% year-on-year. Inflationary pressures remain, which means the ECB will probably not slow down the pace of tightening. The main inflation figure for the Eurozone will be published tomorrow.

British Prime Minister Rishi Sunak expressed his optimism about the new version of the Northern Ireland Protocol. This deal will regulate the flow of goods from England to Northern Ireland. The new version proposes a green band for goods remaining in Northern Ireland and a red band for goods destined for Ireland, the EU, and the rest of the EU, which will naturally be subject to stricter inspections.

Despite the rise in gold in the last two days, analysts are confident that the jump in government bond yields will prevent gold and silver from showing a significant and lasting recovery. The precious metals are protective assets at a time of rising inflation but not at a time of monetary tightening.

In the oil market, the strong rebound in US inventories in the previous weeks continues to constrain the rise in oil prices. Investors are also worried about lower demand due to falling economic activity in the face of higher global interest rates imposed to fight inflation. On Tuesday, the US sold an additional 26 million barrels of crude oil from its Strategic Petroleum Reserve.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.08% on the day, China’s FTSE China A50 (CHA50) gained 0.39%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.79%, India’s NIFTY 50 (IND50) fell by 0.51%, and Australia’s S&P/ASX 200 (AU200) was positive by 0.47%.

Recent comments from the new deputy governor of the Bank of Japan, Shinya Uchida, and the current candidate for governor of the Bank of Japan, Kazuo Ueda, set a “dovish” tone in the testimony before the upper house of the Japanese parliament. These comments put an end to rumors that the new BOJ management will change monetary policy in the near future. As for economic data from Japan: Industrial production showed its first decline in 3 months, with output falling by 4.9% m/m in January. Retail sales increased by 1.9% m/m, with clothing and automobiles making the largest contribution.

S&P 500 (F) (US500) 3,970.15 −12.09 (−0.30%)

Dow Jones (US30)32,656.70 −232.39 (−0.71%)

DAX (DE40) 15,365.14 −16.29 (−0.11%)

FTSE 100 (UK100) 7,876.28 −58.83 (−0.74%)

USD Index 104.95 +0.28 (+0.27%)

• – Australia GDP (q/q) at 02:30 (GMT+2);
• – Australia Consumer Price Index (m/m) at 02:30 (GMT+2);
• – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
• – China Manufacturing PMI (m/m) at 03:30 (GMT+2);
• – China Non-Manufacturing PMI (m/m) at 03:30 (GMT+2);
• – German Retail Sales (m/m) at 09:00 (GMT+2);
• – Switzerland Retail Sales (m/m) at 09:30 (GMT+2);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
• – German Unemployment Rate (m/m) at 10:55 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 12:00 (GMT+2);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+2);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.