WEEKLY MARKET RECAP
Your weekly global financial market newsletter
WEEKLY MARKET RECAP
Your weekly global financial market newsletter
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% |
GER40 +1.13% |
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.
NATGAS -13.35% |
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% |
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% |
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.
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