Will markets pull back?

Will markets pull back?

Corporate earnings news
Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates

Corporate Earnings News

Corporate earning calendar 7 March - 14 March 2024

Thursday: Broadcom, Costco Wholesale, DocuSign, MongoDB
Friday: Algonquin Power and Utilities Corp., Janux Therapeutics
Monday: Oracle, Legend Biotech Corp.
Tuesday: Uranium Energy Corp., Westrock Coffee Company, Core Scientific Inc.
Wednesday: Navigator Holdings, Ivanhoe Electric
Thursday: Adobe, Wheaton Precious Metals

US Stock Indices Price Performance

Nasdaq 100 -0.15% MTD +7.08% YTD
Dow Jones Industrial Average 
-1.05% MTD +2.38% YTD
NYSE +1.10% MTD +5.63% YTD
S&P 500 +0.17% MTD +7.02% YTD

The S&P has climbed down this week from its highs reached last Friday as most of the Magnificent Seven stocks experienced a drop. However, market breadth appears to be increasing with the majority of the S&P constituents being in positive territory so far this year.

US stocks

Mega caps: A rather disappointing week for the “magnificent seven” as expectations for rate cuts were pushed out further following Fed Powell’s testimony on Wednesday and there are growing concerns around the sustainability of their valuations. Apple, Microsoft, Alphabet, Tesla, and Amazon are all down. Earlier this week it was reported that Apple iPhone sales in China fell 24% the first 6 weeks of the year. The company was also hit this week by the European Union fining it €1.84 billion, about $2 bn, for stifling competition from rival music-streaming apps. The fine was one of the EU’s largest-ever antitrust penalties against a single company. Meta Platforms is up on the week despite a two-hour outage on Tuesday that was caused by a technical issue and impacted hundreds of thousands of users globally. The outage has been estimated to have cost the company an estimated $3 billion. Nvidia is once again up this week after hitting a record high on Wednesday.

Energy stockshad a mixed week this week as oil markets remained range bound despite OPEC cuts, continuing attacks on merchant ships in the Red Sea, and a smaller bump up in US inventories than expected. Occidental Petroleum, Apa Corp (US), Shell, Baker Hughes, ExxonMobil, Phillips 66, Halliburton, and Marathon Petroleum are all up this week. However, ConocoPhillips and Energy Fuels are down. Chevron is also down this week after it filed a contract arbitration claim related to Hess Corporation’s proposed Guyana oil property sale and suggested it may counter Chevron Corp's pending deal for the assets.

Materials and Mining stocks had a mixed week as gold prices soared to record highs, and a slightly weaker dollar was supportive to Copper prices. However, the continuing weakness in demand from China, particularly in its housing market, appears to be weighing on prices. Zinc has also been up this past week on reduced supply and nickel has dropped due to possible improvements in supply from key producer, Indonesia. Nucor, CF Industries, Albemarle and Yara International are all down this week. Freeport-McMoRan, Newmont Mining, Mosaic are all up this week. Sibanye Stillwater is down this week but has seen some recovery since it said on Tuesday it suffered a $2 billion loss and scrapped its final dividend due to the slump in metal prices.

European Stock Indices Price Performance

Stoxx 600 +0.73% MTD +4.01% YTD
DAX +0.22% MTD +5.76% YTD
CAC 40 +0.34% MTD +5.46% YTD
IBEX 35 +1.96% MTD +0.94% YTD
FTSE MIB +2.40% MTD +9.92% YTD
FTSE 100 +0.65% MTD -0.70% YTD

Europe’s Stoxx 600 index rose 0.4% to touch a new record earlier today, going past 500 points as enthusiasm over tech, and in particular AI stocks, and financial shares continues. Pharmaceutical and Mining stocks have also performed well. It has been a resilient earnings season and investors still appear to be considering that the ECB will cut rates in June.

According to LSEG I/B/E/S data, as of 5 March, the Stoxx 600 fourth quarter earnings were expected to decrease 6.0% from Q4 2022. Excluding the Energy sector, earnings were expected to decrease 0.6%. Fourth quarter revenue was expected to decrease 0.6% from Q4 2022. Excluding the Energy sector, revenues were expected to increase 3.7%. Of the 241 companies in the STOXX 600 that have reported earnings by 5 March for Q4 2023, 51.0% reported results exceeding analyst estimates. In a typical quarter 54% beat analyst EPS estimates.

Other Global Stock Indices Price Performance

MSCI World Index +0.01% MTD +4.72% YTD
Hang Seng -0.44% MTD -3.57% YTD

Currencies

The US dollar slipped slightly this week despite Fed Chair Jerome Powell confirming on Wednesday in his testimony to Congress that continued progress on inflation "is not assured," though the Fed still expects to reduce its benchmark interest rate later this year. Minneapolis Fed President Neel Kashkari said that he expects the Fed to cut interest rates only one or two times this year. However, it appears that traders have got used to Powell’s refrain and have instead focused more on job and wage growth, both of which appear to be slowing, indicating a cooling labour market. However, all eyes will be on Friday’s NFP number and wage data to see whether or not the Fed will proceed with rate cuts in June. The GBP is +0.86% MTD against the USD and +0.02% YTD. Sterling strengthened this week due to signs that the British economy may be starting to recover with the UK final Services PMI for February recording a revised reading of 53.8 (versus previous estimate of 54.3), which is still in expansionary territory. The budget, revealed on Wednesday by Chancellor Jeremy Hunt, delivered no surprises. The EUR is +0.87% MTD against the USD and -1.26% YTD. The euro climbed this week after data revealed that inflation is lessening in the eurozone, albeit at a slower rate than anticipated. The ECB, meeting today, is widely expected to hold rates steady as ECB policymakers have repeatedly signalled over the past month that they are in no rush to loosen monetary policy despite headline inflation easing and continued stagnation in the eurozone economy.

Cryptocurrencies

Bitcoin +8.07% MTD +53.38% YTD
Ethereum 
+14.87% MTD +68.3% YTD

Bitcoin hit a record high on Tuesday at $69,000 before sliding back. The rise is attributed to expectations of looser monetary policy and massive inflows into new spot Bitcoin ETFs.

Fixed Income

US 10-year yield to 4.10%.
German 10-year yield to 2.32%.
UK 10-year yield to 3.99%.

Yields on US treasuries have fallen this week, hitting a one-month low. Fed Chair Jerome Powell told the House of Representatives Financial Services Committee that "if the economy evolves broadly as expected," the Fed will cut its policy rate this year as the Fed was on a "good path" toward achieving a soft landing.

Eurozone yields fell this week as the ECB kept its policy rate unchanged at 4.0% today. Investors are currently pricing fewer than 100 basis points of moves, having pared back earlier expectations. In the latest ECB staff projections, inflation has been revised down due to a lower contribution from energy prices. Inflation is now expected to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026. The projections for core inflation excluding energy and food have also been revised down to 2.6% for 2024, 2.1% for 2025 and 2.0% for 2026. However, the ECB did cite still high domestic price pressures and wage growth. It is clear that policymakers will need more evidence that inflation, which fell last month, is definitively under control and that wage pressures are indeed falling.

Commodities

Gold futures to $2,154.30 per ounce.
Silver futures to $24.40 per ounce.
West Texas Intermediate crude to $79.08 a barrel.
Brent crude to $82.88 a barrel.

Gold has been on a searing 16-month rally, rising 30% from just above $1,600 per troy ounce in late 2022, supported primarily by record buying by emerging markets’ central banks and extraordinary demand by Chinese retail investors. Over the past 2 years, Shanghai gold prices (adjusted for currency) have consistently traded above the international benchmark price. Such a premium suggests a tightness of local gold supply. Furthermore, despite China being the largest gold producer, gold exports to mainland China — mostly from Hong Kong, Switzerland and the UK — hit an 8-year high in 2023.

Gold has risen on expectations that the Fed’s easing path will start this year, a fall in both, real and nominal rates after a PCE inflation report came in-line with expectations last week, and an influx of funds into commodities, motivated in part by recently rising oil prices. Gold has also been boosted as a safe haven due to rising geopolitical risks and may also have been supported by suggestions that the Fed is considering a reverse operation twist, whereby it would purchase more short term bonds in an attempt to alter the shape of the yield curve and attract investors to the longer end of the curve.

Oil trading has remained remarkably narrow for a week in which OPEC+ output cuts were extended through June. US crude oil stockpiles rose less than expected last week, building by 1.4 million barrels to 448.5 million barrels in the week ended 1 March vs the 2.1 million expected, the EIA said. In addition, Red Sea attacks by the Iran-backed Houthi militia in Yemen, caused disruption in oil tanker movements, causing supply tightness, especially in Asian markets.

Note: As of 4 pm EST 6 March 2024

Key data to move markets this week

EUROPE

Thursday: German Manufacturing Orders, and ECB Monetary Policy meeting.
Friday: 
Eurozone GDP, Eurozone Employment Change, German Industrial Production, and German PPI.
Tuesday: 
German Harmonised Index of Consumer Prices.
Wednesday: 
Eurozone Industrial Production.

UK

Tuesday: ILO Unemployment Rate, ILO Employment Change, Claimant Count Rate, Claimant Count Change, Average Earnings. 
Wednesday: 
GDP, Industrial Production, and Manufacturing Production.

US

Thursday: Initial Jobless Claims, Nonfarm productivity, Unit labour costs, Consumer Credit, Federal Reserve Chairman Jerome Powell testifies before Congress, a speech by Cleveland Fed President Loretta J. Mester, and US President Biden gives the annual State of the Union address.
Friday: 
Nonfarm payrolls, Unemployment Rate, Labour Force Participation Rate, Average Hourly Earnings, Average Weekly Hours and a speech by New York Fed President John Williams.
Sunday: 
US Daylight Savings Time.
Tuesday: 
CPI and Monthly Budget Statement.
Thursday: 
Initial and Continuing Jobless Claims, PPI, Retail Sales, and Business inventories.

CHINA

Thursday: Imports, Exports, Trade Balance.
Friday:
CPI, PPI, Loan Growth.

GLOBAL

Tuesday: OPEC Monthly Market Report.

Global Macro Updates

Powell’s caution remains. On Wednesday Fed Chair Jerome Powell suggested that the Fed had managed to steer a soft landing and that rate cuts were on the cards for this year. The comments kept investors' expectations of an interest rate cut in June, however, much will depend on what is happening with the labour market. Traders will be watching Friday’s NFP and wage data closely along with today’s jobless claims to see if the expected easing in labour markets that the Fed is anticipating, is actually happening. If the labour market numbers remain strong, this will make it much harder for the Fed to consider a rate cut. As suggested by Minneapolis Fed President Neel Kashkari on Wednesday, continued economic resilience could make it appropriate for the Fed to cut rates only twice, or possibly just once, this year. This would contribute to further dollar strengthening, leading to higher yields, and likely negatively affecting equity markets as well as gold and cryptocurrency prices.

A boring budget. On Wednesday, UK Chancellor of the Exchequer, Jeremy Hunt, presented the new budget. It held no real surprises: Hunt trimmed national insurance contributions by 2 pence in the Pound but was otherwise fiscally cautious given the UK’s £3 bn debt burden. The introduction of an investment and savings plan dedicated to support UK businesses lifted Sterling. UK 10-year gilt yields hit their lowest in three weeks following the release of the budget.

Is China sweet or sour for investors? China has declared its growth target for this year to once again be 5%. However, absent additional policy support, the weakness of the domestic economy, signified by deflation and an ongoing property market crisis that has required government and central bank intervention, has left many doubtful of it being able to achieve that goal.

Yet there may be some hope for the Chinese economy with signs that its export growth may be increasing. China’s exports have jumped so far this year with January and February data showing a strong rise. Trade data for the first two months of the year is typically combined to avoid distortions from the Lunar New Year holiday. Overseas shipments in US dollar terms rose 7.1% in the January-February period from a year earlier. The trade surplus reached a record $125 billion, while imports grew 3.5%. There has been an uptick in trade with its neighbours and largest trading partner, the Association of Southeast Asian Nations (ASEAN) bloc with trade rising 4.8% followed by the EU, with which trade fell 4.1%. Trade with the US was up slightly, rising 0.7%. However, the increase in external demand may still be affected by mounting sanctions and restrictions on its products, particularly by the US. The concerns about the growing diversification of production and global supply chains away from China, and heightened geopolitical tensions around Chinese activities in the South China Sea and against Taiwan may weigh on China’s export market share this year, thus reducing the ability to achieve that 5% growth target.

While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

This article is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here.

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