InvestMacro

By JustMarkets

At Wednesday’s close of the stock exchange, the Dow Jones Index (US30) rose by 0.40%. The S&P 500 Index (US500) was up 0.96%. The NASDAQ Technology Index (US100) closed positively at 1.30%.

Chicago Fed Chairman Goolsbee stated yesterday that even if inflation is slightly higher for a few months, it would still be consistent with a path back to target. He added that the Fed’s current policy is pretty restrictive and said that he doesn’t support the idea of waiting until inflation hits 2% in 12 months to start cutting interest rates. That raised the odds that the Fed could begin cutting rates this spring. Markets estimate the odds of a 25 bps rate cut at 14% for the March 19-20 FOMC meeting and 46% for the April 30-May 1 meeting.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 0.38%, France’s CAC 40 (FR40) gained 0.68% yesterday, Spain’s IBEX 35 (ES35) declined 0.09%, and the UK’s FTSE 100 (UK100) closed positive 0.75%.

Eurozone industrial production for December unexpectedly rose by 2.6% m/m, beating expectations of 0.2% m/m and the most significant increase in 16 months.

ECB Vice President Guindos said yesterday that it would take some time before the ECB has the necessary information to confirm that inflation is steadily returning to our 2% target. His colleague, ECB Governing Council representative Makhlouf, added that the short-term outlook for the Eurozone economy points to stagnation amid tightening financing conditions, weak business and consumer confidence, and weak foreign demand. Swaps put the odds of an ECB rate cut at 25 bps at 8% at the March 7 meeting and 55% at the April 11 meeting.

Silver gained support on Wednesday after Eurozone industrial production unexpectedly rose rapidly in 16 months, a positive for industrial metals demand. Gold also gained support as an inflation hedge after the US 10-year breakeven inflation rate rose to a 3-week high on Wednesday.

WTI crude futures fell as low as $76 a barrel on Thursday, extending losses from the previous session as official data showed that US oil inventories rose by about 12 million barrels last week, the highest in three months. The latest figure also exceeded market expectations for a 2.56 million barrel rise in inventories and raised demand concerns in the world’s largest oil consumer. Meanwhile, OPEC’s latest report forecasts global oil demand growth in 2024 and 2025, contrasting with more conservative estimates from other sources.

Asian markets traded mixed on Wednesday. Japan’s Nikkei 225 (JP225) was down 0.69% for the day, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to Chinese New Year celebrations, Hong Kong’s Hang Seng (HK50) was up 0.84%, and Australia’s ASX 200 (AU200) ended the day negative 0.74%.

Japan’s economy unexpectedly contracted 0.4% year-on-year in the fourth quarter of 2023, falling short of market forecasts that expected 1.4% growth. It was the first decline in five years amid high inflation and an uncertain global economic outlook.

Traders are looking to add new positions on Chinese indices after Chinese authorities said the country’s holiday season could witness a record 9 billion domestic passenger trips this week. Meanwhile, Beijing has taken a dozen steps since January to cushion the rout in China’s stock market while supporting weak demand in the real estate market amid the lingering real estate crisis.

The Australian dollar held below $0.65 in a weak market reaction as weak employment data reinforced a dovish view of the country’s monetary policy. Australia’s unemployment rate rose to a two-year high of 4.1% in January, and employment increased by just 500, while analysts had expected 30,000 new jobs. The Reserve Bank of Australia is expected to cut interest rates by a total of about 40 basis points this year, with the first move coming in August. Earlier this week, RBA Governor Michele Bullock said inflation didn’t need to slow to 2.5% before the central bank would consider cutting the money rate. However, she emphasized that the central bank remains open to the possibility of a further rate hike in the face of persistent inflation. Expectations for Australian consumer inflation in February 2024 stood at 4.5%, unchanged for the third consecutive month and at its lowest level since January 2022.

S&P 500 (US500) 5,000.62 +47.45 (+0.96%)

Dow Jones (US30) 38,424.27 +151.52 (+0.40%)

DAX (DE40) 16,945.48 +64.65 (+0.38%)

FTSE 100 (UK100) 7,568.40 +56.12 +0.75%)

USD Index 104.71 -0.25 (-0.23%)

• – Japan GDP (q/q) at 01:50 (GMT+2);
• – Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
• – Japan Industrial Production (m/m) at 06:30 (GMT+2);
• – UK GDP (q/q) at 09:00 (GMT+2);
• – UK Industrial Production (m/m) at 09:00 (GMT+2);
• – UK Trade Balance (m/m) at 09:00 (GMT+2);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 10:00 (GMT+2);
• – Eurozone Trade Balance at 12:00 (GMT+2);
• – US Retail Sales (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+2);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+2);
• – US Industrial Production (m/m) at 16:15 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• – New Zealand RBNZ Gov Orr Speaks at 20:40 (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

US stocks fell sharply on Tuesday after releasing a sharper-than-expected inflation report. At Tuesday’s stock market close, the Dow Jones Index (US30) was down 1.35%. The S&P 500 index (US500) was down 1.37%. The NASDAQ Technology Index (US100) closed negative at 1.80%. In the United States, the annual inflation rate eased to 3.1%, beating expectations of 2.9%, while core inflation came in at 3.9% compared to the forecast of 3.7%. Consumer prices rose by 0.3% from the previous month, and core inflation rose by 0.4%, exceeding expectations. The strong inflation report forced investors to revise their expectations for rate cuts by the Federal Reserve in March and May. All key sectors were down, with real estate and technology leading the way as shares of major technology companies such as Microsoft (2.1%), Amazon (2.1%), and Alphabet (1.6%) fell.

Equity markets in Europe were mostly down on Tuesday. Germany’s DAX (DE40) fell by 0.92%, France’s CAC 40 (FR40) decreased by 0.84% yesterday, Spain’s IBEX 35 (ES35) lost 0.59% on Tuesday, and the UK’s FTSE 100 (UK100) closed negative 0.81%.

The ZEW Economic Sentiment Indicator for Germany rose for the seventh consecutive month to 19.9 in February 2024, reaching its highest level in a year and beating market expectations of 17.5 amid hopes that major central banks will start cutting interest rates this year. In addition, German investor morale improved to a one-year high in February, while the assessment of current economic conditions fell to its lowest level since mid-2020. More than two-thirds of respondents expect the ECB to cut interest rates in the next six months due to lower inflation, while nearly three-quarters of respondents predict the US central bank will cut interest rates soon. Swaps put the odds of a 25 bps ECB rate cut at 7% at the next meeting on March 7 and 52% at the April 11 meeting.

The UK unemployment rate for the fourth quarter of 2023 fell to 3.8% from 4.0%. The UK wages rose more than expected in the year’s final quarter, leading investors to cut bets on a rate cut by the Bank of England this year.

The Swiss franc fell to 0.88 per US dollar in February, its lowest in two months, after lower-than-expected inflation data strengthened the case for doves at the Swiss National Bank (SNB). Swiss consumer prices rose 1.3% year-on-year in January, well below market expectations of 1.7% and the lowest in two years, remaining below the SNB’s upper 2% target for the seventh consecutive month. Inflation fell despite repeated calls for stubbornly higher rates as the country scraped electricity subsidies and revised the value-added tax. In turn, this result has raised bets that the SNB may start to cut its benchmark discount rate in the first half of the year, including the possibility of a March cut. The franc was also pressured because the SNB increased its foreign exchange reserves for the second month in a row.

WTI crude oil prices rose to 78 dollars per barrel on Tuesday, hitting a two-week high, as tensions in the Middle East continued to support oil prices. Meanwhile, OPEC maintained its forecasts for sustained growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for those years, pointing to additional growth potential. In addition, the report noted a 350,000 bpd reduction in OPEC oil production in January following the implementation of a new round of voluntary production cuts by the OPEC+ alliance in the first quarter.

The US natural gas prices fell more than 5.5% to below $1.7/MMBtu, hitting their lowest since July 2020 due to rising production and weak demand. Gas wells pushed production to near-record levels after a sharp cold snap in mid-January.

Asian markets were mostly up on Tuesday. Japan’s Nikkei 225 (JP225) was up 2.89% for the day, China’s FTSE China A50 (CHA50) will not trade for the rest of the week due to Chinese New Year celebrations, Hong Kong’s Hang Seng (HK50) was also not trading yesterday, and Australia’s ASX 200 (AU200) ended the day negative 0.15% on the day.

The sharp fall in the Japanese yen yesterday prompted Japan’s Finance Minister Shun’ichi Suzuki to warn that authorities were closely monitoring the market without confirming whether they would intervene again. Deputy Finance Minister for International Affairs Masato Kanda also said that Japan would take appropriate action in the foreign exchange market if necessary, as the sharp fall of the yen is not suitable for the economy. The country intervened in the foreign exchange market three times in 2022 when the yen fell to a 32-year low of 152 per dollar but has taken no further action since then.

S&P 500 (US500) 4,953.17 −68.67 (−1.37%)

Dow Jones (US30) 38,272.75 −524.63 (−1.35%)

DAX (DE40) 16,880.83 −156.52 (−0.92%)

FTSE 100 (UK100) 7,512.28 −61.41 (−0.81%)

USD Index 104.85 +0.68 (+0.65%)

• – UK Consumer Price Index (m/m) at 09:00 (GMT+2);
• – UK Producer Price Index (m/m) at 09:00 (GMT+2);
• – Eurozone GDP (q/q) at 12:00 (GMT+2);
• – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
• – UK BoE Gov Bailey Speaks at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

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

By JustMarkets 

At Monday’s stock market close, the Dow Jones (US30) index was up 0.33% and set a new all-time high. The S&P 500 index (US500) was down 0.10%. The NASDAQ Technology Index (US100) closed negative 0.30%. Ahead of the monthly US consumer price report, equities were pressured by long-position liquidation.

Fed Chair Bowman’s hawkish comments on Tuesday also weighed on stocks when she stated that current interest rates are in a good place to maintain downward pressure on inflation and that she does not believe a Fed rate cut is appropriate in the near term.

Today, the US will release its consumer inflation (CPI) report. On an annualized basis, overall inflation is expected to fall from 3.4% to 3.1%. Core inflation (which excludes food and energy prices) is forecast to fall from 3.9% to 3.7% y/y. If progress with inflation continues, this will put pressure on the dollar index but will also have a favorable impact on stock indices and the precious metals market (gold and silver). Suppose progress in the fight against inflation stalls or develops less favorably than expected. In that case, the US Treasury yields will likely jump as traders abandon bets on the sharp rate cuts scheduled for this year and push back the expected start date of the Fed’s easing cycle. Such an outcome would have to be favorable for the US dollar soon and hurt risk assets (euro, British pound, stock indices, and gold).

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) rose 0.65%, France’s CAC 40 (FR 40) gained 0.55% yesterday, Spain’s IBEX 35 (ES35) jumped 0.89% on Monday, and the UK’s FTSE 100 (UK100) closed positive 0.02%.

The European Central Bank does not need to weaken the eurozone economy further to bring inflation under control as demand is still weak, ECB board spokesman Piero Cipollone said on Monday. These comments contrast with other more hawkish remarks from ECB officials. Currently, swaps are priced at a 25 bps chance of an ECB rate cut of 11% at the next meeting on March 7 and 60% at the April 11 meeting.

WTI crude futures hit around $77 a barrel on Tuesday, near their highest levels in two weeks, as heightened geopolitical tensions in the Middle East continue to support oil prices. On Monday, Israel launched airstrikes on the southern Gaza city of Rafah after Israeli Prime Minister Benjamin Netanyahu rejected a ceasefire offer from Hamas. However, diplomatic talks in Beirut indicate possible progress in reducing tensions between Israel and Hamas. Meanwhile, uncertainty on the demand side could limit oil price gains as inflation risks could delay interest rate cuts by the Federal Reserve.

Most markets in the Asia-Pacific region, including China, Hong Kong, Japan, South Korea, and Singapore, were closed for holidays. Australia’s ASX 200 (AU200) ended the day positively, 0.06%.

Inflation expectations in New Zealand reached the lowest level in 2 years at 2.5% in the first quarter of 2024. But overall sentiment remained unfavorable after RBNZ Governor Adrian Orr told a parliamentary committee on Monday that the current inflation rate of 4.7% is still too high and money rates should stay at restrictive levels. The statement came amid the central bank’s preparations for its first policy meeting of the year in late February.

The NAB Australia Business Confidence Index rose to 1 in January 2024 from an upwardly revised zero in the previous month but remained below its long-term average. The improvement in the index was mainly in manufacturing and construction, while sentiment in wholesale and retail trade declined. The Westpac-Melbourne Institute of Australia’s consumer sentiment index jumped 6.2% to 86 in February 2024 from 81 in January, the highest in 20 months, amid lower inflation and optimism that the Reserve Bank of Australia has ended its tightening campaign.

S&P 500 (US500) 5,021.84 −4.77 (−0.10%)

Dow Jones (US30) 38,797.38 +125.69 (+0.33%)

DAX (DE40)  17,037.35 +110.85 (+0.65%)

FTSE 100 (UK100) 7,573.69 +1.11 (+0.02%)

USD Index  104.13 +0.05 (+0.05%)

• – Japan Producer Price Index (m/m) at 01:50 (GMT+2);
• – New Zealand Inflation Expectations (m/m) at 04:00 (GMT+2);
• – 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);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – US Consumer 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.