Market recap: Week of 8–12 Jan 2024
Stock market
CNBC & Yahoo Finance:
• The Financial Times Stock Exchange 100 Index down 0.4% & US stocks up on 5 Jan after strong US non-farm payroll data.
• S&P 500 up 0.6%, Dow rose 0.3%, Nasdaq rose 0.7% post opening bell.
• US payroll gains 216,000, beating expectations of 171,000 increase in December.
• Unemployment flat at 3.7%, contrary to expected uptick to 3.8%.
• Government jobs (+52k), healthcare (+38k), leisure/hospitality (+40k) drive hiring boost.
• Construction (+17k), retail trade (+17k) also contribute to job growth.
• Fed funds futures react, lowering odds of March rate cut to 56%.
UK economic outlook
The Guardian, BNN Bloomberg and JP Morgan:
• Former Bank of England Deputy Governor Howard Davies warns of BoE’s potential slowness in cutting interest rates. BoE previously criticized for lagging response to rising inflation.
• UK company insolvencies surged in 2023 — 30,199 businesses involved in insolvency actions, a 52% increase from 2021, as per Creditsafe.
• J.P. Morgan Research takes a bearish stance on sterling for 2024, anticipating a drop to 1.18 in Q1 before a rise to 1.26 by December. Economic resilience noted amid policy tightening concerns.
Economic indicators
Business Insider:
• JPMorgan's Marko Kolanovic warns of stock market vulnerability in 2024.
• Investors should brace for a challenging risk-reward scenario.
• Equities and bonds rallied year-end, but markets now seem overbought. Complacent sentiment with high Relative strength indices, Bull-Bear, low VIX, tight credit spreads, and rich valuations.
• Partial reversal of year-end rally due to stronger data and geopolitical risks.
• Stock investors urged to reassess risk appetite; low bond yields signal potential low growth.
Japan economy
Business Times & Market Screener:
• Core inflation slows for the 2nd consecutive month.
• Pressure eases on Bank of Japan to exit ultra-loose monetary policy.
• Tokyo CPI rises 2.1% YoY in Dec, matching forecasts.
• BOJ to scrutinize data at Jan. 22-23 policy-setting meeting.
• Governor Ueda emphasizes ultra-loose policy until demand-driven price hikes fueled by wage gains.
• Household spending drops for the 9th straight month in November.
• BOJ's regional branch managers' meeting on Thursday may provide insights into wage gain prospects.
• Market analysts anticipate BOJ's cessation of negative interest rates in April, foreseeing a potential boost to the yen.
Fed insights
Wall Street Journal:
• Top Fed official signals Bank Term Funding Program's likely wind-down in mid-March.
• Michael Barr, the Federal Reserve's vice chairman for banking supervision, suggests no extension for the emergency lending program.
• Bank Term Funding Program allowed banks to take Fed advances for up to a year by pledging various bonds as collateral.
• $114 billion credited to banks under the temporary program designed to counter fallout from Silicon Valley Bank's failure.
• Barr emphasizes the program's emergency nature, established to prevent a repeat of events like Silicon Valley Bank's crisis.
• The move aimed to help banks meet withdrawals without selling bonds at a loss, as witnessed in Silicon Valley Bank's case last March.
• Insights shared at an event sponsored by Women in Housing & Finance.
Europe monetary policy
Nasdaq:
• European Central Bank policymaker Mario Centeno dismisses waiting until May to decide on monetary policy, citing no additional pressure on inflation.
• Nearly 150bp of ECB rate cuts priced in by year-end, according to market expectations.
• Francois Villeroy de Galhau advocates for 2024 rate cuts when inflation expectations solidly anchor at 2%, backed by effective and durable data.
• Mario Centeno sees annual inflation of 2.9% in the eurozone in December as "good news" but downplays concerns about second-round effects on wages.
• Dollar index rises ahead of Thursday's U.S. Consumer Price Index report and amid concerns over the euro zone's recessionary trend.
• EUR/USD falls 0.2% despite higher bund-Treasury yield spreads, highlighting challenges faced by the euro zone's manufacturers.
Bitcoin ETFs
Reuters:
• U.S. Securities and Exchange Commission greenlights 11 applications, including giants like BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck, for U.S.-listed bitcoin Exchange Traded Funds.
• Game-changer for Bitcoin: Opens doors for institutional and retail investors, providing exposure without direct ownership.
• A significant boost for the crypto industry, overcoming recent challenges and scandals.
• Standard Chartered analysts predict ETFs could attract $50-100 billion in 2024, potentially propelling Bitcoin to $100,000.
UK inflation
Yahoo:
• Governor Andrew Bailey prioritizes tackling inflation, keeps interest rate future undisclosed.
• Stresses UK's crucial return to the 2% inflation target.
• No comments on monetary policy outlook at Treasury select committee meeting.
• Deutsche Bank projects UK inflation hitting BoE's 2% target this spring, revised to 2.5% YoY in 2024.
• Money markets foresee five quarter-point interest rate cuts, dropping from 5.25% to 4%, post-October's 0.3% economic shrink.
• Traders bet on four 2024 interest rate cuts, adapting to economic challenges.
Fed watch
CNBC & Pew Research Center:
• U.S. CPI increased by 0.3% in December, surpassing estimates.
• Year-on-year growth at 3.4%, beating expectations of 3.2%.
• Rising shelter costs driving the surge.
• Shelter costs up by 0.5% for the month, contributing over half to core CPI increase.
• Annual basis shows a 6.2% increase in shelter costs.
• Despite inflation spike, futures traders anticipate March rate cut. CME Group’s FedWatch indicates a 69% probability of Fed cutting rates in March.
• The major indexes ended the day mostly flat after the latest reading on inflation.
Precious metals
Kitco:
• Weak U.S. dollar drives record gold prices in Dec 2023, holding above $2,000/oz.
• HSBC warns: Gold may not maintain this level in the new year.
• Market seen as overstretched; HSBC anticipates a decline due to:
• Higher prices impacting physical demand.
• Headwinds on jewellery and bullion sales.
• Real interest rates to rise; potential headwind for gold.
• HSBC notes historical sensitivity of gold to US real rates.
• Bedrock factors sustaining gold prices:
• Geopolitical and trade risks.
• Central bank demand.
• 75 nations with elections in 2024.
• "Gold faces headwinds, but bedrock factors may sustain historically high levels," says HSBC.
Disclaimer:
The information contained in this blog is for educational purposes only and is not intended as financial or investment advice. It is considered accurate at the date of publication by the sources. Changes in circumstances after the time of publication may impact the accuracy of the information.
Past performance is not indicative of future results. Doing your own research before making any trading decisions is recommended.
