Weekly market recap

Your weekly global financial market newsletter

  • Yulia Navalnaya, the widow of Alexei Navalny, expressed her love for him on social media two days after he died in a Russian jail. Her Instagram post featured a photo of them together, adding a personal touch to her formal expression of grief at a public event shortly after his death. Navalny, 47, died after falling unconscious while serving a prison sentence. The cause of death is still unclear. During a speech at the Munich Security Conference, Navalnaya held Russian authorities responsible for her husband’s death and received support from Western leaders who condemned the incident. The Kremlin dismissed these reactions as unacceptable. Navalnaya will attend the EU’s Foreign Affairs Council on Monday. She has always stood by Navalny in his struggles against the Russian authorities, supporting him through legal battles and imprisonments. Born in Moscow, she met Navalny in 1998 and married him despite his limited public profile at the time. Navalny’s final message to her, shared on Telegram before his death, conveyed his enduring love and gratitude.
  • During a meeting, China’s Foreign Minister Wang Yi urged U.S. Secretary of State Antony Blinken to lift sanctions on Chinese entities, cautioning that attempts to isolate China would backfire on the U.S. He emphasised respecting China’s development rights. While Sino-U.S. relations have shown improvement, disagreements persist, with the U.S. imposing sanctions on Chinese firms over alleged military ties and human rights abuses. Wang warned against efforts to isolate China, emphasising potential consequences. The discussions covered regional issues such as Ukraine and the Korean Peninsula. Wang reiterated China’s stance toward Taiwan and emphasised dialogue and exchanges.
  • During a global security conference, Ukrainian President Volodymyr Zelenskiy called for an end to the artificial shortage of weapons aiding Russian forces and emphasised the urgency of stalled U.S. aid. European leaders acknowledged previous shortcomings in assisting Ukraine and stressed the need for tangible support. Regarding the delayed U.S. aid, Vice President Kamala Harris denounced political manoeuvring in Congress and highlighted the importance of a strategic partnership with Ukraine. Concerns were raised about the potential impact of Donald Trump’s return to the U.S. presidency on international alliances. European leaders emphasised the imperative for Europe to bolster its defence capabilities and underscored the need to strengthen NATO solidarity.

Indices

Despite some positive earnings surprises offsetting disappointing inflation data, major benchmarks ended the week with mixed performances, marking the first weekly decline for the S&P 500 Index since the beginning of the year. Notably, declines were mostly seen in large-cap growth stocks, while an equal-weighted version of the S&P 500 reached a new intraday record high on Thursday. Following its significant drop on Tuesday, the small-cap Russell 2000 Index rebounded strongly, leading the gains for the week. In local currency terms, the pan-European STOXX Europe 600 Index closed the week 1.39% higher, buoyed by signs of easing inflation and a more favourable outlook for interest rate cuts, which bolstered investor sentiment. Germany’s DAX saw a gain of 1.13%, while the UK’s FTSE 100 Index rose by 1.84%.

 

US30
-0.11%
US100
-1.54%
US500
-0.42%
GER30
+1.13%

Commodities

US natural gas futures rose to $1.6/MMBtu on Friday amid expectations of reduced output in 2024 following a significant price decline. Throughout the week, US Natgas prices plummeted nearly 13%, reaching their lowest since June 2020 at $1.59/MMBtu after the EIA reported lower-than-expected storage demand. Government data revealed US utilities withdrew 49 billion cubic feet of natural gas from storage, below market expectations of a 67 bcf draw due to warmer-than-normal weather suppressing heating demand. Additionally, the report indicated that gas in storage is 15.9% above the seasonal norm. Gold stabilised around $2,000 per ounce on Friday but was poised for a second consecutive weekly decline amidst concerns that strong US inflation data could delay Federal Reserve interest rate cuts. Despite this, weekly jobless claims data suggested a resilient labour market in the US. Furthermore, gold surged 0.6% on Thursday following weaker-than-expected US retail sales data, triggering a selloff in the dollar and Treasury yields.

Gold
-0.55%
Silver
+3.55%
BRENT
+1.35%
NATGAS
-13.35%

Forex

On Friday, the Dollar Index stabilised near 104.4, poised for its second consecutive weekly increase, as investors continued to evaluate the economic and monetary policy landscape in the US. The previous day, the greenback experienced a 0.4% decline following a larger-than-anticipated drop in US retail sales for January, primarily driven by reduced receipts at auto dealerships and gasoline service stations. Meanwhile, a separate report revealed an unexpected decrease in weekly claims to 212K, surpassing market forecasts of 220K. Regarding monetary policy, Atlanta Fed President Raphael Bostic remarked this week that despite progress in combating inflation, he was not prepared to advocate for interest rate reductions due to ongoing risks. Conversely, Chicago Fed President Austan Goolsbee cautioned against delaying rate cuts for too long, suggesting the central bank should exercise caution in its timing.

EUR/USD
-0.05%
USD/JPY
+0.58%
GBP/USD
-0.15%
USD/CAD
+0.17%

Crypto

JPMorgan upgraded Coinbase (NASDAQ: COIN) from Underweight to Neutral, citing the surge in Bitcoin’s price as the primary reason. The bank maintained an $80 price target on the stock. Previously, JPMorgan had expressed concerns about unrealistic optimism regarding new money flowing into the cryptocurrency market through newly approved U.S. spot Bitcoin ETFs. However, they observed that the launch of these ETFs, initially seen as a “sell-the-news” event, led to significant Bitcoin price appreciation. This rise in Bitcoin’s value is driving flows into Bitcoin ETFs and lifting prices of other tokens, including Ethereum. JPMorgan believes this upward momentum in cryptocurrency prices will sustain and enhance Coinbase’s earnings power.

BTC
+7.67%
ETH
+13.67%
LTCUSD
-1.32%
XMRUSD
-3.19%

Macro

In the United Kingdom, the economy showed resilience at the start of the year, potentially influencing the Bank of England’s cautious stance on policy easing. Unemployment for the three months ending in November was lower than expected at 3.9%, and the January Purchasing Managers’ Index (PMI) for services exceeded estimates, indicating sector expansion for the third consecutive month. However, the UK economy officially entered a recession in the final quarter of the previous year. While inflation remained stable in January, there were expectations of interest rate cuts by the Bank of England as early as June. GDP contracted 0.3% in the three months through December, and services inflation rose to 6.5%. BoE Governor Andrew Bailey downplayed the significance of the GDP data, emphasising recent positive indicators but cautioned about high services inflation and the need for evidence of slowing wage growth.

In the eurozone, core government bond yields experienced a slight increase following a higher-than-expected U.S. inflation report. European Central Bank President Christine Lagarde expressed concerns about rushing into policy easing if inflation rebounds, leading to upward pressure on short-dated bond yields. Conversely, peripheral eurozone bond yields, particularly those of longer-dated Italian debt, declined.

The European Commission (EC) has cut its forecast for eurozone economic growth in 2024 to 0.8% from 1.2% previously forecast in November. This adjustment was attributed to inflation reducing purchasing power and higher interest rates limiting credit. The EC anticipated economic growth to pick up to 1.5% in 2025, slightly lower than the previous estimate of 1.6%. Additionally, the second GDP estimate confirmed economic stagnation in the eurozone in the fourth quarter of the previous year, following a 0.1% contraction in the preceding three months.

In the United States, the week brought significant economic surprises, notably in the services sector activity reading, which surged unexpectedly to a four-month high, indicating solid expansion. The Institute for Supply Management’s gauge also showed robust growth, although service prices surged to their highest level in nearly a year, contrasting with recent data showing falling prices for many manufacturing inputs. Additionally, the Labor Department revised its initial estimate of December consumer inflation slightly downward.

Treasury yields increased at the week’s start, influenced by a strong jobs report from the previous week and comments by Federal Reserve Chair Jerome Powell. Powell’s remarks, reiterating that immediate rate cuts were unnecessary, caused some concern, especially given the unexpectedly strong January payrolls report. Retail sales reported by the Commerce Department on Thursday plummeted in January, with some economists attributing the weakness to seasonal factors and harsh weather. However, sales in restaurants and bars increased. Initial jobless claims were below consensus while continuing claims were slightly above. Housing starts came in lower than expected, but a gauge of homebuilder confidence surprised on the upside.

The inflation data led investors to significantly lower their expectations for potential rate cuts. According to the CME FedWatch Tool, the futures market priced in only a 10.5% chance of a rate cut in March, compared with 65.1% a month earlier. The yield on the benchmark 10-year U.S. Treasury note surged to its highest level since December 1, reaching 4.33% on Friday.


What to watch out for this week

  • In the United States, the upcoming release of FOMC meeting minutes on Wednesday will provide insights into the potential timing of future interest rate adjustments by the Federal Reserve. These insights will be complemented by comments from various Fed officials. Attention will also be on key data releases, including the flash S&P Global PMIs, which are expected to point to a slight slowdown in both the manufacturing and services sectors. Additionally, investors will closely monitor existing home sales, the Chicago Fed National Activity Index, and weekly jobless claims.
  • In the Eurozone, investors are eagerly awaiting the ECB monetary policy meeting accounts for guidance on potential interest rate adjustments. Flash PMIs for the Eurozone, Germany, and France are expected to suggest a minor improvement in private-sector activity this month. Furthermore, flash figures should reveal an uptick in consumer sentiment across the bloc, while the Ifo Business Climate indicator for Germany is projected to show an improvement from its weakest level since May 2020. However, the updated Q4 GDP data is likely to confirm a 0.3% contraction in the German economy in the final quarter of 2023. Meanwhile, the Central Bank of Turkey is expected to maintain its benchmark interest rate at 45% in February, pausing the hiking campaign initiated in June 2023. Other notable data releases include the Eurozone's final inflation figures for January, current account data, construction output, and car registrations; Spain and Switzerland's foreign trade data; France's business sentiment figures; Italy's final CPI reading; and Turkey's business and consumer survey results.
  • In the United Kingdom, investors await the release of Flash PMIs, Gfk consumer confidence data, and CBI Distributive Trades figures.

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