Hey Folks, this will be a very important week for the markets as we will hear what the US FEDs have to say regarding rates and inflation. It has the capacity to move markets a good deal. Get my take in this week’s round-up.
MARKET SOUND BITES:
US Indexes ended lower for the week, as investors weighed upside surprises in inflation data and signs of moderating consumer spending. The DOW held up best among the major indexes, reaching a record high on Wednesday before falling back to end the week. Energy shares outperformed on the back of higher oil prices, while technology shares lagged due to weakness in NVIDIA and other chipmakers.
The Labor Department’s consumer price index (CPI) rose 0.4% in February, in line with consensus expectations, but core prices (less food and energy) rose a tick more than expected, also by 0.4%. Thursday’s upside producer inflation surprises appeared to cause greater consternation. The producer price index (PPI) rose 0.6% in February, roughly double consensus estimates and the most in six months. While core producer prices rose only 0.3%, this was also slightly more than expected. On a year-over-year basis, headline producer prices were up 1.6%, well above expectations and at the highest level since September. The Commerce Department reported that retail sales rose 0.6% in February. Online sales also declined 0.1%, marking a sharp deceleration from the 6.4% increase over the past 12 months. And finally, the University of Michigan’s survey of consumer sentiment, released Friday, indicated a modest decline in consumer expectations.
The bond market’s reaction to the inflation surprises was more pronounced, with the yield on the benchmark 10-year Treasury note touching its highest intraday level (4.32%) since February 27.
In Europe we see in the U.K. the unemployment rate rose from 3.8% to 3.9% in the three months through January. Wage growth, excluding bonuses, fell to 6.1%, the lowest level since mid-2022. The UK economy showed signs that it may be recovering from a recession in the second half of 2023. Gross domestic product (GDP) increased 0.2% sequentially in January. Meanwhile many analysts expect the ECB to cut interest rate by June.
IN Japan, the BoJ’s ultra-accommodative policy has weighed heavily on the yen, boosting many of the country’s large-cap exporters who derive their revenues from overseas. BoJ Governor Kazuo Ueda gave a relatively downcast view of the country’s prospects, stating that while the economy is recovering moderately, weakness has been seen in some data. GDP in the fourth quarter of 2023 expanded 0.1% on the quarter compared with the earlier release suggesting the economy had contracted 0.1%. On an annualized basis, this equated to a 0.4% expansion versus a prior fall of 0.4%.
Chinese stocks rose as the government’s recent market stabilization measures boosted investor confidence despite a weak economic outlook. China’s CPI rose an above-consensus 0.7% in February from the prior-year period, reversing January’s 0.8% decline and marking the first positive reading since August 2023 as food and services prices increased and consumption surged during the weeklong Lunar New Year holiday. However, the PPI fell a bigger-than-expected 2.7% from a year ago, accelerating from January’s 2.5% drop and marking the 17th monthly decline, the longest streak of declines since 2016. The People’s Bank of China injected RMB 387 billion into the banking system via its medium-term lending facility and left the lending rate unchanged at 2.5%, as expected. And finally, China’s new home prices fell 0.3% in February for the eighth straight month, according to the statistics bureau. The data showed no sign of turnaround in China’s property crisis despite Beijing’s attempts to shore up demand.
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Trade Smart !
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