Weekly Market Updates / 1 month ago

The Axiom IFS Update 18th March 2024


Will this week’s inflation and PMI data for the UK continue to show falling inflation and (modest) economic growth?


A range of data released last week seemed to suggest that inflation is persisting and therefore making it less likely that central banks will soon begin to cut interest rates. There is more data out this week as well as interest rate decisions announced by the Federal Reserve and Banks of England, Canada, Japan and Switzerland. The prospects of a change this week are very small for the first three but not for the last two where the rate may rise in Tokyo but fall in Geneva. Elsewhere the presidential ‘election’ in Russia returned the inevitable result and the erstwhile FTX founder Sam Bankman-Fried is due to be sentenced at a court in New York after prosecutors requested a prison term of 40-50 years.


The pound was on the back foot following Friday’s release of Consumer Inflation Expectations which rose by 3%. This data prompted markets to increase their wagers on a Bank of England rate cut in June, exerting some pressure on sterling. Looking ahead, investors will closely monitor several market indicators including the Consumer Price Index, Producer Price Index, and Retail Price Index, all due tomorrow morning.


The U.S. Dollar steadied near two-week highs as focus turned squarely to the Federal Reserve’s meeting on Wednesday. While the Fed is widely expected to keep rates unchanged, any signals on its plans for interest rate cuts in 2024 will be closely watched. However, the central bank may also strike a more hawkish chord than markets are hoping for, especially as recent data showed stickier than expected inflation in February.


The Euro had benefited from a run of better than expected readings of late. Moreover, the bloc’s single currency has been supported by the ECB’s recent decision to keep borrowing costs at record highs at its March meeting. Looking forward, the Eurozone Harmonized Index of Consumer Prices and Trade Balance released this morning came in exactly as per market’s expectations so this week’s moves are likely tied to any movement in USD.


Though arguably the main North American event this week is likely to be Wednesday’s Fed meeting, there is still plenty going on north of the border in Canada. At the centre of attention should be tomorrow’s CPI release, which markets expect to show a modest uptick in headline inflation, with YoY CPI rising from 2.9% in January to 3.1% in this latest print. The extent to which the loonie depreciates will ultimately be determined by context of the BoC’s summary of deliberations, due to be released on Wednesday.


Gold edges higher in Monday’s late European session as the US Dollar faces pressure. The US Dollar Index (DXY) trades slightly lower at 103.40 due to improved risk appetite. The appeal for risk-sensitive assets strengthened due to the strong recovery in Chinese Retail Sales and Industrial Production data for February, which signals an improvement in China’s domestic demand.


US equity futures rose as a fresh bout of optimism over artificial intelligence spurred tech stocks and investors awaited key policy decisions from the Federal Reserve and Japan. Contracts on the S&P 500 advanced and the Nasdaq 100 jumped more than 1% after Bloomberg reported that Apple is in talks to build Google’s Gemini AI engine into the iPhone. Google parent company Alphabet Inc. rallied more than 5% in premarket trading, While Apple was up 1.4%. Chipmaker Nvidia and Tesla added around 3%. European stocks were little changed.


Standard Chartered raised its year-end forecast for bitcoin’s (BTC) price to $150,000 from $100,000. The bank also predicted BTC will reach a high for the cycle of $250,000 next year before settling around $200,000, according to an emailed investment note on Monday. Standard Chartered based its analysis on a comparison with the price of gold after gold exchange-traded funds (ETFs) were introduced in the U.S. and a correlation between ETF inflows and the BTC price. Spot bitcoin ETFs started trading in the U.S. in January.


Oil hit a fresh four-month high as Chinese economic data beat expectations, and Ukrainian drone attacks on Russian refineries heightened geopolitical risks. Global benchmark Brent rose to around $86 a barrel, after gaining 4% last week, while WTI climbed toward $82. China’s factory output and investment grew more strongly than expected at the start of the year, figures on Monday showed.




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