Hey everyone, remember, for most of you, roll your clocks forward 1 hour as we are moving into Daylight Savings time. The markets are also rolling along in a solid bull market as well but some cracks are starting to show. Get my take here in this week’s round-Up.
Market Sound Bite:
Most Indexes ended on a rare down note this week as the S&P 500 fell by more than 1% for the first time since mid-February attributed in part to disappointing policy news out of China however most equities regained momentum at midweek, mostly on the back of easing demand and inflation pressures domestically.
Mid-week the US FEDs reported in its periodic Beige Book survey of regional economic conditions that consumers were showing more sensitivity to rising prices, while the Labor Department said that job openings fell in January to their lowest level in three months. The quits rate—the share of workers leaving jobs voluntarily, typically considered a good measure of workers’ perception of the ease of finding a new job—also fell to its lowest level since August 2020, early in the rebound from the pandemic. Friday’s jobs report reassured investors by showing employers added 275,000 jobs in February, more than forecasts of around 200,000. However, January’s gain was revised significantly lower, from 353,000 to 229,000. Moreover, the unemployment rate rose unexpectedly from 3.7% to 3.9%, its highest level in over two years. In a positive sign for inflation, average hourly earnings rose 0.1%, below expectations and down sharply from January’s 0.5% increase.
Fed Chair “Boom Boom” Powell testified before Congress at midweek reiterating previous Fed talking points. He did offer some less hawkish takeaways on the timing of the path of rate cuts by stating policymakers were “not far” from having the confidence that inflation’s downtrend will be sustained, enabling them to begin cutting rates. This helped ease Equity market concerns. “Boom Boom” Powell’s comments and the downside economic surprises helped push the yield on the benchmark 10-year U.S. Treasury note to its lowest intraday level (4.03%) since February 2.
In Europe, the ECB left its key deposit rate unchanged at 4.0% but revised its inflation and economic growth forecasts lower and indicated that discussion on dialing back restrictive policy later in the year had begun. They now see inflation falling to 2.0% in 2025, rather than 2026. Projections for core inflation, which excludes volatile food and energy prices, were also revised lower, with the latest update suggesting that it would hit the 2.0% target in 2026. The ECB’s latest forecast cut economic growth to 0.6% in 2024, which was slightly lower. However, it expects growth to accelerate to 1.5% in 2025.
And in Japan, we see household spending fell by 6.3% year on year (y/y) in January, the sharpest decline in nearly three years. Weakness was evident across most categories and notably in auto sales. Inflationary pressure has had the effect of weighing on domestic demand. Conversely, nominal wage growth came in higher than anticipated, with wages rising 2.0% y/y in January versus estimates of 1.2%. And finally, the consumer price index for the Tokyo area rose 2.5% y/y in February, in line with expectations.
In China we see that equities gained as the government’s recent market stabilization measures lifted investor confidence despite an uncertain economic outlook. Beijing set an economic growth target of around 5% this year at the National People Congress (NPC), China’s parliament, which started March 5 and ends March 11. The target was the same as last year when China’s economy officially rose 5.2%. However, analysts said it would be hard to match last year’s growth pace, which benefited from a post-lockdown rebound in early 2023. And on the economic front, the S&P Global survey of services activity fell to a weaker-than-expected 52.5 in February from January 52.7. Chinese exports and imports rose in the first two months of the year. Exports grew an above-consensus 7.1% in January and February from the prior-year period, improving from December’s 2.3% increase.
Enjoy this Week’s Round-up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
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