Last week, the international market was in turmoil, with the Federal Reserve and the Bank of England holding their hands and the Bank of Japan ending a negative interest rate cycle.
In the market, U.S. stocks rose across the board, with the Dow up 1.97%, the Nasdaq up 2.85%, the S&P 500 up 2.29%, and the three major European stock indexes performing differentiated, with the UK's FTSE 100 up 2.63%, Germany's DAX 30 up 1.50%, and France's CAC 40 down 0.15%.
There are a lot of highlights this week, with Federal Reserve Chairman Jerome Powell making another appearance, the personal consumption expenditures (PCE) indicator for February may affect the outlook for a rate cut in June, and international gold prices rising and retreating, and market divergence has intensified. A number of key data from Europe have been released, and the market is focused on inflation and the performance of consumer indices.
Whether inflationary pressures in the United States can ease
The Federal Reserve held an interest rate meeting last week and kept interest rates unchanged for the fifth time in a row. Despite the recent escalation of inflationary pressures, the latest interest rate dot plot shows that the Federal Open Market Committee (FOMC) expects three more rate cuts this year. A number of Fed officials will speak this week, and Powell will participate in the discussion at the San Francisco Fed's macro and monetary policy meeting on Friday, and the latest comments on the economy and monetary policy will be worth watching.
Because the Fed needs further evidence of a slowdown in inflation before cutting rates, more attention will be paid to future data. As the FOMC's preferred inflation gauge, the February PCE price index became the biggest focus. After the release of the consumer price index (CPI) and producer price index (PPI) in February, the market expects core PCE to increase by 0.3%, down 0.1 percentage point from January, but still above the level of sustainable decline of 0.2%. At the same time, real consumer spending may fall for the second consecutive month due to inflation.
In addition, Conference Board Consumer Sentiment, University of Michigan Consumer Survey, and Chicago Purchasing Managers' Index (PMI) data are critical for markets to assess economic conditions at the end of the first quarter. Mortgage rates fell in early February, which has already boosted existing home sales, which are expected to extend their rebound in February.
In terms of earnings reports, companies to watch this week include McCormick, Carnival, Jeffrey and Walgreens, and Chinese concept stock Zhihu will also disclose its results.
It is worth mentioning that former US President Donald Trump's media group is expected to complete its IPO this week under the symbol DJT after completing its merger with Digital World Acquisition Corp, a special purpose acquisition company (SPAC). Considering Reddit's performance in landing on the NYSE last week, the company's listing could be a timely rain for Trump, who is currently facing a huge legal bill of $450 million.
Crude Oil & Gold
International oil prices edged higher last week as investors focused on the outlook for the situation in Gaza, while news emerged that the United States had urged Ukraine to stop attacks on Russian energy infrastructure. The WTI front-month contract rose 0.06% to $80.43 a barrel, and the Brent front-month contract rose 0.11% to $85.43 a barrel.
U.S. Secretary of State Antony Blinken said last week that talks in Qatar would focus on a roughly six-week truce that would allow for the release of 40 Israeli hostages in exchange for hundreds of Palestinians held in Israeli prisons.
Manish Raj, managing director of Velandera Energy Partners, said oil prices had been stable at around $80 with no further progress. "That's because there is an overall abundance of inventories in the global market, and [the Fed] is a bit vague about the timing of interest rates. ”
International gold prices fell after hitting $2,200 last week, and the market continued to gamble on the Fed's policy outlook. The COMEX gold futures contract for April delivery on the New York Mercantile Exchange rose 0.35% to $2,160.50 an ounce.
Phillip Streible, chief market strategist at Blue Line Futures, said: "As long as our real interest rates are low and central banks continue to buy, while retail demand and political risk are hedged, the depth of the [gold] correction is limited." He added that gold needs to stay above support around $2,145 to $2,150 to continue its bullish momentum.
However, TD Securities said in the report that "the situation for gold has deteriorated, with the CTA now 'maximum long' and macro trading positioned in line with interest rate market pricing, reducing purchases after massive buying activity over the past few months." ”
In the brick-and-mortar market, jewellery sales in India have been slightly sluggish in the latest week as record prices hit consumers, but demand in China remains steady.
Whether the European economy can stabilize
ECB Governing Council member and Bundesbank President Nigel said last Friday (22nd) that the probability of the ECB cutting the key interest rate in the coming months is increasing, "We will see a growing probability of the first rate cut before the summer holidays, and action in June is more likely than when the ECB meets next in April." ”
Nigel's view is in line with recent guidance from ECB President Christine Lagarde and a number of other rate-setters. But he also cautioned against cutting borrowing costs too soon and not assuming that the first move would be followed by a series of rate cuts. "For the rest of the year, this is not yet an established agreement. He said.
On the data front, March inflation data from Spain, Belgium, France and Italy will be closely watched. The sluggish Eurozone economy has shown signs of recovery recently, and upcoming business surveys will indicate whether this recovery is strengthening, including Germany's GfK consumer confidence for April, Eurozone's business and consumer index for March, and France's consumer confidence for March.
The Bank of England left interest rates unchanged, saying that the conditions for lowering them "are moving in the right direction." According to data released by the Office for National Statistics last week, the CPI rose 3.4% year-on-year in February, significantly lower than the previous month's 4% and fell to the lowest level in two and a half years, which made the Bank of England's interest rate cut node expected to be brought forward.
Money market derivatives pricing suggests that investors are fully considering a rate cut in August, with a high probability of action in June, and the timing of the rate cut will depend on whether the data shows that the UK economy remains strong and the extent to which inflation is declining.
What to watch for this week
