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Markets Update: The outlook for the week remains cautious, with investors likely to adopt a wait-and-see approach until they receive more clarity on key inflation reports.
Economic Calendar
Global Markets Roundup: 26 Feb 2024
Investors are gearing up for a pivotal week marked by inflation concerns, as market sentiment reflects upward pressure on the core U.S. inflation rate while anticipating potential downturns in European and Japanese consumer prices. Notably, the core services ex-housing PCE measure, favored by Fed officials, may see a substantial 0.6% month-on-month surge, the most significant gain since December 2021. This could drive the six-month annualized pace to approximately 2.5%, up from the recent two-month period below 2%, prompting the market to push back expectations of the first Fed rate cut to June from May, according to FEDWATCH.
EQUITY
The Nikkei NI225 ended 0.35% higher at a new closing high of 39,233.71. The index eased from an all-time peak of 39,388.08 earlier in the session after the market resumed trade following a holiday on Friday.
Prominent European stock exchanges experienced a decline in performance. The STOXX 50, having reached a 23-year high on Friday, faced a marginal loss of approximately 0.2%. Simultaneously, the STOXX 600, which had achieved record-high levels the previous week, also witnessed a 0.2% decrease in its value. This retracement follows the recent peaks in the market, signaling a subtle shift in investor sentiment.
FOREX
USDJPY, exhibited a marginal uptick, reaching 150.47 per dollar. Notably, it has experienced a decline of over 6% against the US dollar in the year thus far. This decline can be attributed to the substantial interest rate differential between the United States and Japan, underscoring the economic dynamics influencing the exchange rate movements. The DXY dollar index trades steady at 103.886. EUR/USD trades steady at 1.0830, below Thursday's three-week high of 1.0891. Sterling GBPUSD fell 0.03% to $1.26675, Australian dollar AUDUSD down 0.16% to $0.6553, while the New Zealand dollar NZDUSD fell 0.5% to $0.6167.
COMMODITIES
Brent crude experienced a 0.6% decline, settling at US$81.11 per barrel, while West Texas Intermediate crude saw a similar decrease, closing at US$76.00 per barrel in the early hours of the trading day. According to a report from Reuters on the same day, market analysts anticipate that an escalation in inflation, surpassing initial projections, may impede the implementation of anticipated reductions in high interest rates. These rates, which have consistently curbed global demand growth, are now subject to potential delays, casting a shadow over the near-term outlook of the energy market.
Gold prices experienced a slight retreat, maintaining a position just below the peak observed over the preceding two weeks. This adjustment was prompted by diminishing expectations of an imminent interest rate cut in the United States, impacting the appeal of the non-yielding precious metal. Despite this, mitigating the decline were escalating tensions in the Middle East, which served to limit further losses. At 0812 GMT, spot gold (GOLD) recorded a marginal 0.1% decline, settling at $2,034.6 per ounce, following its notable ascent to the highest level since February 7 on the previous Friday. Simultaneously, U.S. gold futures (GOLD) exhibited a modest 0.2% decrease, reaching $2,044.5 per ounce. These market dynamics underscore the delicate balance between macroeconomic factors influencing gold prices, such as U.S. monetary policy, and geopolitical tensions, which continue to play a pivotal role in shaping the trajectory of this non-yielding asset.
Three-month copper on the London Metal Exchange HG1! was down 0.7% at $8,509.50 per metric ton by 0805 GMT, while the most-traded March copper contract on the Shanghai Futures Exchange HG1! slid 0.4% to 68,990 yuan ($9,584.47) per ton.
COFFEE
In a strategic move to bolster its coffee industry, Kenya is set to conduct an auction on Tuesday, February 26, 2024, featuring 1,392 metric tons of mild arabica green coffee beans. The announcement was made by the Nairobi Coffee Exchange on Monday, indicating the country's commitment to promoting and sustaining its coffee trade. The preceding auction, which took place on February 20, reported a noteworthy average price of $244.02 for a 50-kilogram bag of coffee beans. This figure represents a marginal decrease of 1.5% from the previous auction on January 13, where the same quantity was valued at $247.71 per bag. These statistics were disclosed in a provisional market summary report issued by the Nairobi Coffee Exchange.
The auction on February 20 witnessed the sale of a total of 1,371 metric tons of green coffee beans, generating a revenue of $6.7 million. In comparison, the prior auction recorded sales of 1,654 tons, amounting to $8.2 million. This data underscores a decrease in both the volume of coffee beans sold and the overall revenue generated, reflecting the current dynamics of the coffee market. Kenya's proactive approach to auctioning a substantial quantity of high-quality coffee beans underscores the nation's dedication to maintaining a thriving coffee industry. The upcoming auction on Tuesday is poised to be a crucial event, with stakeholders eagerly anticipating the market response to this sizable offering of mild arabica green coffee beans.
Arabica coffee futures for May delivery (KCK24) concluded the trading session with a decline of -2.85 points, representing a decrease of -1.56%. Simultaneously, March ICE robusta coffee futures (RMH24) experienced a notable downturn, closing -127 points lower at -4.00%. The retreat in coffee prices observed on Friday was particularly evident in the robusta market, which marked a significant drop to a 7-week low. This decline was influenced by the prevailing weakness in the Brazilian real.
This week, market attention will be drawn to speeches from ten Federal Reserve members, including the influential New York Fed Chief, John Williams. Federal Reserve Chair Jerome Powell is scheduled to provide Senate testimony on March 7. Meanwhile, the European Union's headline Consumer Price Index (CPI) on Friday is anticipated to decelerate to 2.5% from 2.8%, with the core CPI at 2.9%, down from 3.3%. This is expected to lead the European Central Bank (ECB) to revise down its inflation forecasts at its March meeting, though the market is currently discounting the likelihood of a rate cut. Futures probabilities suggest a one-in-three chance of an easing in April, nearly fully priced for June (0#ECBWATCH). Additionally, inflation reports from Germany, France, and Spain on Thursday are poised to set the stage for the broader developments.
Japan's Consumer Price Index (CPI) is scheduled for release on Tuesday, forecasting a slowdown to an annual 1.8% from December's 2.3%. Despite this, the core measure is anticipated to remain at 3.3%, above the Bank of Japan's 2% target. This divergence from the inflation slowdown argues against a policy tightening, yet market speculation continues regarding the possibility of the Bank of Japan raising rates to zero in March or April from the current -0.1% (0#BOJWATCH). Adding to the challenges, the Treasury market faces a demanding week of new supply, including $127 billion of two- and five-year notes due later on Monday, and an additional $42 billion in seven-year paper due on Tuesday. Furthermore, there is a non-negligible risk of a U.S. government shutdown if Congress fails to agree on a borrowing extension by Friday.
The conclusion of the week will feature the release of the February China Purchasing Managers' Index (PMI), with analysts anticipating a slight improvement to 49.5. Simultaneously, the U.S. Institute for Supply Management (ISM) survey of manufacturing is forecasted to rise to 49.5.
Key events shaping Monday's market landscape include:
- UK CBI Distributive Trades for February
- Remarks by Bank of England Deputy Governor Sarah Breeden and Chief Economist Huw Pill
- Participation by ECB President Christine Lagarde in a plenary debate on the ECB Annual Report
- Insights from Fed Bank of Kansas City President Jeffrey Schmid on the economic and monetary policy outlook.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team