Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates
US Stock Indices Price Performance
Nasdaq 100 +1.05% MTD +8.36% YTD
Dow Jones Industrial Average +0.29% MTD +3.77% YTD
NYSE +2.97% MTD +7.58% YTD
S&P 500 +1.61% MTD +8.57% YTD
New forecasts from the Fed yesterday sparked a rally in equity markets, pushing the S&P 500 and Nasdaq Composite to new highs. The S&P 500 topped 5,200 on Wednesday following the Fed’s announcement that it expected three cuts this year, down from the four cuts projected in December.
According to LSEG I/B/E/S data, as of 20 March, the 23Q4 Y/Y blended earnings growth estimate is 10.1%. If the energy sector is excluded, the growth rate for the index is 13.7%.
Of the 498 companies in the S&P 500 that have reported earnings to date for 23Q4, 76.1% reported above analyst expectations. This compares to a long-term average of 66%. The 23Q4 Y/Y blended revenue growth estimate is 3.7%. If the energy sector is excluded, the growth rate for the index is 5.2%.
US stocks
Mega caps: A slightly mixed week for the magnificent seven. Apple, Alphabet,Nvidia, Meta Platforms and Tesla are all up on the week. Microsoft and Amazon are flat on the week, although Amazon’s ride was a bit bumpier, dropping earlier in the week before recovering.
Alphabet was bolstered this week by news of discussions between Alphabet and Apple regarding the potential use of Gemini technology to power AI features on new iPhones. Additionally, Nvidia’s Graphics Technology Conference (GTC) contributed to the positive market sentiment it experienced this week as it unveiled its next generation of AI chips, the Blackwell series.
However, regulatory risks remain for the magnificent seven. According to Bloomberg news, Apple will be sued by the US Justice Department for violating antitrust laws by blocking rivals from accessing hardware and software features of its iPhone. The Justice Department is already suing Google’s parent company, Alphabet, for monopolisation, while the Federal Trade Commission is pursuing antitrust cases against Meta Platformsand Amazon.
Energy stocks had a generally good week with the sector up on continuing supply concerns. Occidental Petroleum, ConocoPhillips, BP, Apa Corp (US), Shell, Baker Hughes, ExxonMobil, Phillips 66, Halliburton, Schlumberger, Marathon Petroleum and Energy Fuels are all up this week.
Chevron, which is down this week, agreed earlier this week that it will pay $5.6 million to the California Department of Conservation, and $7.5 million to the California Department of Fish and Wildlife (CDFW) for past oil spills in Kern County, Bakersfield.
Materials and Mining stocks had a very good week as gold prices continued to rally to new highs on the prospect of lower interest rates. Copper, zinc, nickel, tin and aluminium prices are also up this week with aluminium prices climbing to an 11-week high early today due to improving demand prospects from top consumer China. CF Industries, Albemarle, Yara International, Newmont Mining, Nucor, Mosaic, Freeport-McMoRan, and Albemarle are all up this week. Sibanye Stillwater is down this week. On Wednesday the company said it has suspended production at its Siphumelele shaft in Rustenburg, which accounts for nearly 4% of its South African platinum group metal output, after an accident damaged surface infrastructure.
European Stock Indices Price Performance
Stoxx 600 +2.14% MTD +5.47% YTD
DAX +1.91% MTD +7.54% YTD
CAC 40 +2.95% MTD +8.20% YTD
IBEX 35 +7.51% MTD +6.44%YTD
FTSE MIB +5.26% MTD +12.99% YTD
FTSE 100 +1.45% MTD +0.09% YTD
Through 19 March, according to LSEG I/B/E/S data, fourth quarter earnings were expected to decrease 5.9% from Q4 2022. Excluding the Energy sector, earnings were expected to decrease 0.6%. Fourth quarter revenue was expected to decrease 2.0% from Q4 2022. Excluding the Energy sector, revenues were expected to increase 1.9%. 281 companies in the STOXX 600 had reported earnings to date for Q4 2023. Of these, 49.5% reported results exceeding analyst estimates. In a typical quarter 54% beat analyst EPS estimates. 328 companies in the STOXX 600 have reported revenue to date for Q4 2023. Of these, 50.6% reported revenue exceeding analyst estimates. In a typical quarter 58% beat analyst revenue estimates.
Other Global Stock Indices Price Performance
MSCI World Index +1.68% MTD +7.07% YTD
Hang Seng +0.19% MTD -2.96% YTD
Currencies
The US dollar had a mixed week, with the dollar index falling against a basket of currencies after the Fed decision and the new dot plot projections indicating that the Fed is still expecting a soft landing and maintaining the underlying story of inflation easing. The GBP is +1.28% MTD against the USD and +0.44% YTD. Although it is expected that the BoE might not cut before August, cooling inflation with expectations that the BoE is closer to achieving the 2% target than previously projected, have brought the possibility of a June cut into the picture with markets currently pricing in a 75% chance of this happening. The EUR is +1.08% MTD against the USD and -1.05% YTD. Traders are widely expecting the first ECB rate cut in June.
Cryptocurrencies
Bitcoin +10.41% MTD +61.81% YTD
Ethereum +4.61% MTD +52.23% YTD
Bitcoin dropped almost every day since 14 March. The fall has been attributed to overheating market conditions as investors prepare for the halving event expected in April and a drop in demand for Spot Bitcoin ETFs. Bitcoin has been hit by the $326 million exit from the Grayscale Bitcoin Trust while demand for Fidelity Investments and BlackRock Inc. offerings have fallen substantially according to data compiled by Bloomberg. There is also the effect of a higher for longer interest rate scenario which we are seeing from the Fed as this creates a less inviting backdrop for cryptocurrency investors. According to data from CoinGecko, the wider crypto market has lost roughly $460 billion since reaching $2.9 trillion last week. However, historically, Bitcoin’s supply halving has been associated with a significant rise in its price. As noted by Cointelegraph.com, the halving has always preceded a significant bull run in the Bitcoin market.
Fixed Income
US 10-year yield +4 basis points MTD +50 basis points YTD to 4.27%.
German 10-year yield +1 basis points MTD +43 basis points YTD to 2.43%.
UK 10-year yield -12 basis points MTD +58 basis points YTD to 4.02%.
Source: Factset
US yields have risen since last week, but fell on Wednesday after the Fed suggested three rate cuts this year along with faster near-term growth and slightly hotter inflation. The inversion in the yield curve between two-year and 10-year notes narrowed by five basis points on the day to minus 34 basis points. Fed funds futures traders are now pricing in a 74% probability that the Fed will begin cutting rates in June, up from 59% on Tuesday, according to the CME Group's FedWatch Tool.
UK benchmark 10-year yields are largely unchanged since last week, although bond yields across markets had dipped in response to data indicating a steeper-than-anticipated decline in UK inflation for February. The BoE kept rates at its 16-year high for the fifth successive time today. This was largely anticipated. Governor Andrew Bailey said things were “moving in the right direction” on inflation. Traders in swaps markets moved to price in three 25 basis point cuts this year. Although the guidance is unchanged, that “policy would need to remain restrictive for sufficiently long to return inflation to the 2% target” and needs “to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipated.”
Eurozone bond yields have seen a steady rise across the eurozone this past week. This uptick was primarily attributed to stronger-than-expected US inflation data. The data prompted investors to scale back expectations of aggressive rate cuts by the Fed, a trend that mirrored broader market movements throughout 2024. Developed market bonds have demonstrated a high degree of correlation this year, highlighting the critical influence of US developments on the eurozone bond landscape. Germany's 2-year yield, which is particularly sensitive to ECB interest rate expectations, experienced a modest rise of 1 basis point to 2.902% on Wednesday. Derivative markets suggest that investors anticipated roughly 85 basis points of cuts from the ECB this year. Wage developments represent the final obstacle for the ECB. However, data for Q1, expected by June, should provide sufficient clarity to instil confidence that the battle against inflation is progressing in the desired direction.
Commodities
Spot Gold +6.95% MTD +5.98% YTD to $2,186.37 per ounce.
Spot Silver +11.59% MTD +4.79% YTD to $24.93 per ounce.
West Texas Intermediate crude +5.33% MTD +16.07% YTD to $83.44 a barrel.
Brent crude +3.30% MTD +12.45% YTD to $87.36 a barrel.
On Wednesday, the price of gold exhibited a significant upward movement exceeding 1%. This price increase can be attributed to policy signals from the Federal Open Market Committee (FOMC). While the FOMC elected to maintain current interest rates, their forward guidance indicated a projected reduction of interest rates by a cumulative total of 75 basis points (0.75%) by year-end. A decrease in interest rates enhances the relative attractiveness of gold. This confluence of factors, along with continued demand for gold as a safe-haven asset, particularly amid ongoing geopolitical tensions, and central bank purchases, all contributed to the robust performance of the gold market.
Oil prices remain in a state of flux as markets try to balance out supply concerns due to falling US reserves, output cuts from Saudi Arabia and Iraq, drone attacks on Russian energy installations vs demand growth as China, the world’s largest oil importer, reported a 3% year-over-year increase in crude oil throughput for the first two months of 2024. This suggests a continued strong appetite for oil, potentially fueled by post-Lunar New Year travel demand.
This week’s US Energy Information Agency (EIA) data revealed a complex picture. Commercial crude oil inventories, excluding the Strategic Petroleum Reserve, fell by 2 million barrels to 445 million barrels for the week ending 15th March. This surprising draw placed stockpiles approximately 3% below the historical five-year average for this time of year, suggesting a tightening supply situation. The decrease can be attributed to two key factors: increased refinery activity, with capacity utilisation rising by 1% to 87.8%, and strong crude oil exports, which rose by 1.7 million barrels per day to 4.9 million barrels per day.
However, the EIA report also presented some counterbalancing data. While gasoline inventories fell for a seventh consecutive week, down by 3.3 million barrels to 230.8 million barrels, demand for gasoline dipped as well, dropping by 235,000 barrels per day compared to the previous week. Distillate fuel stocks, meanwhile, defied expectations and rose by 624,000 barrels to 118.5 million barrels. This rise contrasted with analyst predictions of a 1.2 million barrel decline.
The combined picture from the EIA suggests a market in flux. The draw in crude oil inventories points towards tightening supply due to increased refining and exports. However, the decline in gasoline demand and the rise in distillate fuel stocks introduce some uncertainty. This interplay of factors, alongside the muted impact of the Fed's decision, likely contributed to the slight dip in oil prices on Wednesday.
Note: As of 5:30 pm EDT 20 March 2024
Key data to move markets this week
EUROPE
Thursday: EU Leaders Summit, German HCOB Composite, Manufacturing and Services PMIs, Eurozone Composite, Manufacturing and Services PMIs, and ECB Economic Bulletin.
Friday: EU Leaders Summit, German IFO Business Climate, Expectations and Current Assessment Surveys, and speeches by German Bundesbank President Joachim Nagel and ECB Chief Economist Philip Lane.
Tuesday: German GfK Consumer Confidence and Spanish GDP.
Wednesday: Spanish Harmonised Index of Consumer Prices, Eurozone Consumer Confidence, Business Climate, and Economic Sentiment Index.
UK
Thursday: S&P Global/CIPS Composite, Manufacturing and Services PMIs, Bank of England Minutes, Interest Rate Decision, and Monetary Policy Report.
Friday: GfK Consumer Confidence and Retail Sales.
Monday: A speech by BoE MPC member Catherine Mann.
US
Thursday: Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, S&P Global Composite, Manufacturing, and Services PMIs, Existing Home Sales Change, and a speech by Federal Reserve Vice Chair for Supervision, Michael Barr.
Friday: Speeches by Fed Chair Jerome Powell, Vice Chair for Supervision Michael Barr, and Atlanta Fed President Raphael Bostic.
Monday: A speech by Atlanta Fed President Raphael Bostic and New Home Sales Change.
Tuesday: Nondefense Capital Goods Orders, Durable Goods Orders, Housing Price Index, and Consumer Confidence.
Global Macro Updates
Same story, different page? As widely expected, Fed officials decided unanimously to leave the benchmark federal funds rate in a range of 5.25% to 5.5%, the highest since 2001, for a fifth straight meeting. As to the timing of the first rate cut, Powell stated that the Fed is still looking for more evidence that inflation is headed toward their 2% goal before moving. Although the latest dot plot projections showed officials believe rates would end 2024 at 4.5% to 4.75%, implying three 25 basis point cuts this year, the tone emerging from the Fed was slightly more hawkish than markets may have anticipated. "Economic activity has been expanding at a solid pace. Job gains have remained strong and the unemployment rate has remained low," the Fed said. It appears that the Fed thinks solid economic growth will continue as it upgraded its 2024 growth forecast to 2.1% from 1.4%. The new economic projections showed the personal consumption expenditures price index excluding food and energy rising at a 2.6% rate by the end of the year, compared to 2.4% seen in the projections issued in December. It also sees the unemployment rate at 4.0%, down from the 4.1% it forecast in December.
Fed Chair Jerome Powell said that the inflation numbers "haven't really changed the overall story, which is that of inflation moving down gradually, on a somewhat bumpy road." In short, the Fed is still expecting a soft landing. He also noted that the labour market remains in good shape, "and that I don’t see those cracks today” in labour markets. Traders raised the probability of the first rate cut in June from 65% on Tuesday to 85% after Powell’s press conference on Wednesday.
A US budget agreement may finally be in sight. Congressional leaders appear to have agreed to a $1.2 trillion deal before Saturday’s deadline that would see a partial shutdown. The plan includes measures for funding the Department of Homeland Security (DHS); the departments of Defense, Labor, Health and Human Services, Education and State; the Internal Revenue Service (IRS); and general government and foreign operations through 30 September, acting just days before a Saturday deadline for a partial government shutdown. The plan is backed by President Joe Biden and leaders of both parties. It imposes a 6% funding cut on the State Department and foreign operations. Republicans fell far short of the 22% domestic spending cut demanded by hardliners. According to The Hill, Democrats appear pleased about a list of investments secured as part of the legislative package, including a $1 billion jump in funding for childcare and Head Start, funding boosts for cancer and Alzheimer’s research, and “climate change and resilience activities” at the Pentagon. Congress has had to pass four stopgap measures so far to keep the government funded into fiscal year 2024, which began on 1 October.
Did things get easier for the BoE? On Wednesday, the Office for National Statistics (ONS) reported that headline inflation for February came in at 3.34%, its lowest in more than two years. It was a drop from January’s 4%. This was below market forecasts and increased expectations of interest rate cuts this summer. Core inflation, which excludes food and energy, fell to 4.5% in February from 5.1% in January. Services inflation, which the BoE watches closely, slowed to 6.1% from 6.5% in January. In February the BoE said that price growth was on track to drop to its 2% target in Q2 due to falling energy costs. Although at the time BoE Governor Andrew Bailey said the markets were right about the need to consider rate cuts, the overall market view since has been that the BoE will delay its first rate cut until August as it waits to ensure that the drop in inflation is indeed sustainable. The BoE left rates at their 16-year high during its meeting today, with the majority of MPC members voting to keep rates unchanged, and only one member, Swati Dhingra, continuing to vote for an immediate cut. Bailey said that “In recent weeks we’ve seen further encouraging signs that inflation is coming down. We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”
Still “unclear” for the ECB. On Wednesday ECB President Christine Lagarde reiterated that “when it comes to the data that is relevant for our policy decisions, we will know a bit more by April and a lot more by June.” Beyond that, the monetary-policy path is unclear.
The ECB has acknowledged that discussions around the first rate cut are happening, however, there appears to be some disagreement among policymakers as to the pace and timing of these rate cuts. The Central Bank of Greece’s President, Yannis Stournaras, has raised the possibility of a series of moves this year while ECB Vice President Luis de Guindos said Tuesday that the ECB will have to adjust policy “based on the data we see.” Although markets have largely priced in the first rate cut for June, there are some disagreements on where these borrowing costs will ultimately end up. The question of the neutral rate for the ECB is important given the relatively weak state of growth for the eurozone relative to the US.
The Governor of the Bank of Spain, Pablo Hernandez de Cos, said on Wednesday that “A stronger-than-expected monetary policy impact remains a downside risk to the euro-area growth outlook.” Lagarde said yesterday that “Our decisions will have to remain data dependent and meeting-by-meeting, responding to new information as it comes in.”
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