Weekly market recap

Your weekly global financial market newsletter

  • The most famous cryptocurrency, bitcoin, posted its best monthly result since February 2020 and its price came significantly closer to an all-time high, surpassing the $60,000 mark for the first time since November 2021. The rise in price is mainly due to the growing interest in trading bitcoin spot ETFs and the approaching date when the next halving of the cryptocurrency will take place. This is expected to happen in April 2024, when the number of blocks will reach 740,000.
  • Trading volumes for bitcoin spot ETFs broke a new record of $7.69 billion at the end of February, with the previous daily record of $4.66 billion on the day of their launch on January 11. As much as 43% of the volume was accounted for by the Shares Bitcoin ETF from BlackRock. With the rise in interest and price of bitcoin, speculation of new all-time highs is already abounding. Matt Hougan, CIO of Bitwise, expects interest to grow from institutional investors, who could push the price up to $200,000 by the end of 2024. On Monday morning, bitcoin surpassed its all-time high against the euro, while also breaking above the €60,000 per bitcoin mark for the first time in history.

Indices

US stocks ended the week mostly positive as data on the decline in consumer sentiment increased the likelihood among investors that the Fed will cut interest rates as early as its May meeting. The S&P 500 Index had its best opening two months since 2019, and technology outperformed thanks to continued excitement about the proliferation of artificial intelligence tools.

Stocks in Europe ended the week with mixed results as investors have to reassess their bets on a rate cut following figures on rising inflation. Europe’s STOXX Europe 600 Index ended the week 0.18% higher, Germany’s DAX rose 1.81%, France’s CAC 40 Index lost 0.41%, and the UK’s FTSE 100 Index gave back 0.31%.

US30
-0.11%
US100
+2.04%
US500
+0.95%
GER30
+1.81%

Commodities

While the price of natural gas rose last week thanks to producers’ efforts to curb production, the commodity price has written off 12% for the whole of February and the commodity price has fallen by almost 60% since the end of October 2023. Thus, at the end of February, the price was at an all-time low when inflation is factored in, and a return to longer-term growth is still uncertain thanks to record production in 2023 and a mild winter.

Oil prices, on the other hand, have been rising for two months in a row thanks to expected global supply constraints and the anticipated extension of production cuts by OPEC+ countries. This was finally confirmed on Sunday, with countries associated with the organisation agreeing to extend voluntary oil production cuts of 2.2 million barrels per day until the second quarter.

The price of gold hit a nine-week high after worse-than-expected PMI data from ISM came in below 50 for the 16th straight session, pointing to continued contraction in the US manufacturing sector.

Gold
+2.32%
Silver
+0.76%
BRENT
+3.21%
NATGAS
+7.96%

Forex

The dollar index continued to fall following poor macro data from the US and a faster than expected decline in the PMI from the ISM. So did the final reading of the Michigan consumer survey, which fell in February, both in terms of expectations and current conditions. Looking ahead, policymakers from the Fed are not unanimous in their predictions about the next path for interest rates. New York Fed President Williams expects rates to fall later this year. Richmond Fed President Barkin, however, sees forecasts of a rate decline as premature, as price pressures persist in the economy, and Chicago Fed President Goolsbee is also of the same opinion.

EUR/USD
+0.19%
USD/JPY
-0.29%
GBP/USD
-0.22%
USD/CAD
+0.39%

Macro

One of the most anticipated events in the US was the release of the Commerce Department’s Personal Consumption Expenditure (PCE) index and its core version (excluding food and energy). The 2.8% year-on-year increase was in line with market expectations and brought reassurance after the 3.9% rise in core inflation in mid-February.

Other data was not as positive, with the worst coming at the end of the week, when the ISM’s Purchasing Managers’ Index fell to 47.8 from January’s 49.1, with markets expecting a rise to 49.5. This is the 16th consecutive contraction (reading below 50) and investors were particularly surprised by the speed of the decline. Apart from the PMIs, the labour and housing market data also surprised unpleasantly, with QoQ GDP growth, consumer confidence data from CB and also Durable Goods Orders in February coming in below expectations.

In Europe, the preliminary inflation data was reported and although it fell (core data too), it was less than expected. Germany also saw a drop in inflation, but it fell more sharply than expected. The seasonally adjusted unemployment rate hovered at 5.9% in February-its highest level in more than two years.

What to watch out for this week

  • We will wait until the end of the week for the most important report of the week, when the NFP numbers come out. This should be one of the biggest clues for investors in estimating the timing of the Fed's interest rate cuts. Stronger numbers could lead to rising fears of inflation picking up again, with markets expecting a drop from January's annual high of 353,000 to 190,000. The unemployment rate is expected to remain at 3.7%.
  • Wednesday and Thursday will feature the highly watched semi-annual testimony of Jerome Powell on monetary policy. A rather cautious approach to possible interest rate cuts is expected due to the aforementioned persistent price pressures and the strength of the economy.
  • The ECB will decide on rates on Thursday, with the widely expected to keep the benchmark interest rate at 4.00%. The ECB is also expected to cut rates for the first time this year, but ECB officials themselves are rather cautious in their announcements and need more evidence of inflation falling to the 2% inflation target. This cautious stance was supported by last week's Eurozone inflation data.
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Source: forexfactory.com
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