Weekly market recap 06 March 2023

06 March 2023

The battle with inflation is still the most debated issue across the globe and major central banks are trying their hardest to keep it under control, however, it seems that the data released are still holding an unclear picture of where interest rates may end up.
During a Racial Inequality Conference in Dallas on Thursday afternoon, Atlanta Federal Reserve President Raphael Bostic made remarks that seemed to trigger a small upswing in the market. Bostic affirmed his backing for a mere quarter-point rate hike at the next policy meeting of the Federal Reserve, in spite of the preceding week’s high inflation data. He went on to suggest that the “Fed may be able to take a break by mid to late summer.”
Christine Lagarde, the President of the European Central Bank, suggested that there would probably be another half-point increase in interest rates at the March 16 meeting. She stated, “We have every reason to believe that there will be another 50-basis-point increase at our next meeting in March. I don’t have any reason to believe that it won’t be like that.” However, the minutes from the February policy meeting indicated that there was only limited evidence of stabilization in the underlying measures of inflation up to that point.
In the UK, During a speech, Andrew Bailey, the Governor of the Bank of England (BoE), cautioned that policymakers may need to increase interest rates beyond 4%, but stressed that such a decision is not a foregone conclusion. He stated, “I would caution against suggesting either that we are done with increasing the Bank Rate, or that we will inevitably need to do more. Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided.”

Indices

In the US, the Dow Jones increased by 1.75 %, while the S&P 500 and Nasdaq 100 rose by 1.9% and 2.68% respectively. This was due to a decrease in Treasury yields and investor confidence in the monetary policy path after Federal Reserve officials’ speeches. The market sentiment was further improved after Atlanta Fed President Raphael Bostic stated that he expects the central bank to raise rates by another quarter percentage point later this month.

European stocks climbed as concerns about interest rates were put aside, and investors turned their attention to positive indicators for an improving economic outlook. The pan-European STOXX Europe 600 Index increased by 1.43% in local currency terms, with major stock indexes also experiencing gains. Germany’s DAX Index rose by 2.42%, while the UK’s FTSE 100 increased by 0.87%.

US30
+1.75%

US100
+2.68%

US500
+1.90%

GER40
+2.42%

Commodities

The ultimate star of this week among commodities was natural gas as it scored a rise by 18.53% from the previous week due to colder winter in the US which still has around 3 weeks until spring begins. Gold and Silver also gained last week from the previous week by more than 2%.

Crude oil, overall, had a remarkable gain last week despite concerns over discussions about UAE leaving OPEC (Organization of the Petroleum Exporting Countries). The news caused prices to stumble a bit, however, bulls were already taking over and the price of crude oil closed above by 4.4%. The upward trend seems to have gotten back as China is slowly opening back from the lockdown and positive data were reported by this top oil importer.

Gold
+2.45%

Silver
+2.37%

BRENT
+3.77%

NATGAS
+18.53%

Forex

Significant gains of the Euro during last week was affected mostly by the hawkish stance of ECB Lagarde to increase interest rates to bring down inflation as data that came in were slightly worse than expected. However, as the week approached the end, the US Dollar gained a larger part back and concluded the week on the Euro side by 0.82%.

The Canadian dollar in correlation with Crude oil gained against the dollar during the week, however, at the end of it, most of the gains were also given back to the US Dollar which closed -0.12%.

EUR/USD
+0.82%

USD/JPY
-0.44%

GBP/USD
+0.80%

USD/CAD
-0.12%

Macro

The monthly change in Durable Goods Orders released in the USA at the beginning of the week has brought worries about the economical situation as the numbers (-4.5% Actual) were worse than what was expected by analysts (-4% Consensus). The decline in economic activity in terms of durable goods orders was also confirmed by the CB Consumer Confidence released on Tuesday with 102.9 points as Actual while Consensus was 108.5 points.
Both ISM, as well as the S&P Purchasing Managers Index, which on a side note, measures the overall economic health of manufacturing activity, have indicated economic contraction. The number released by ISM was 47.7 as Actual in contrast with 48.0 as forecasted. The S&P numbers were 47.3 as Actual and were forecasted at 47.8. On the other hand, PMI for the services sector came out much brighter than manufacturing with 50.6 as actual and 50.5 as forecasted (S&P), and 55.1 as actual against 54.5 as forecasted (ISM).
Preliminary inflation reported in Germany, one of the biggest economies in the Eurozone, was 8.7% actual in contrast with 8.5% which was forecasted. In the Eurozone, the preliminary inflation rate was reported to be 8.5%. Unemployment, on the other hand, stagnated at 6.7% to the previous release.
The working week concluded with PPI in the Eurozone being at 15% yearly and -2.8% monthly change. PMI data from S&P Global services composite in the UK and Eurozone was signaling an expansion.

What to watch out for this week

A rather busy and full-of-impact week is awaiting us ahead with data on NFP and Employment data that will give us strong indications about the development of the economy.
In Germany and the Eurozone, we may expect to receive data on retail sales, revised inflation rates, revised employment change, and most importantly, GDP rates of the Eurozone. Additionally, ECP President Lagarde will be giving a speech that may include some hints regarding interest rates and ECB’s stance on the current economic situation.
In the UK area, apart from the most anticipated release of GDP, we may also await trade balance, and manufacturing production. Additionally, we may expect numbers on retail sales, and the house price index.

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Source: forexfactory.com

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