US equities were mixed on Friday on the back of the AI rally starting to ease, as Fed officials continued to add commentary.
United States
The major indices in the US were mixed on Thursday as the Nvidia led rally, which saw Nvidia reach a 2 trillion market cap, started to lose steam, while Fed Governor Christopher Waller claims there’s “no great urgency” to issue rate cuts. In a recent speech, Waller reiterated similar comments from other Fed policymakers that he would require “a couple more months of inflation data” to be certain that inflation is on the path toward the Fed’s 2% target. Waller added that the current trajectory and path to target inflation, should a major economic shock be avoided, would not be substantially impacted by delaying rate cuts by a “few months.” Current Fed fund futures are pricing in around 80 basis points worth of cuts in 2024, down from the 150 seen at the start of the year as investors start to readjust their expectations.
In economic data this week, investors will be keeping a close eye on the latest PCE inflation data, which is the Fed’s preferred metric for measuring inflation within the economy. Scheduled to be released overnight Thursday, current analyst forecasts are expecting headline and core inflation to have risen 0.3% and 0.4% over the month, and 2.4% and 2.8% on an annualised basis. Wednesday will see the latest consumer confidence and durable goods order data, with the second estimate of the GDP growth rate to follow. To round off the week, Friday will see the release of the latest jobless claims data and manufacturing PMI.
At the close, the Dow Jones finished +0.16% higher, the S&P500 was relatively unchanged at +0.03%, the Nasdaq Composite was -0.28% lower, with the VIX down -5.43% to 13.75. At the close, treasury yields were slightly lower, with the 2-year rates down 2.1 basis points to 4.692% and the 10-year down 7.4 basis points to 4.249%, while the US dollar was relatively unchanged at -0.02%.
Europe
European equities were higher on Friday as the AI led rally saw the Euro Stoxx 600 reach a record high at 497.74, while the latest economic data underwhelmed. Friday saw the release of the latest Business climate data for Germany, with the report coming in line with expectations as sentiment slightly improved on the previous month’s reading. While the latest UK consumer confidence figures released on Friday came in below estimates, as investor optimism starts to sway.
In economic data this week, investors will be focusing on the latest inflation data in Germany and the Eurozone scheduled to be released on Friday, with Eurozone unemployment to follow. In what is a fairly German heavy week of economic data, Tuesday will see the release of the latest consumer confidence data, with retail sales and unemployment on Thursday.
At the close, the Euro Stoxx 600 rose +0.43%, with the DAX +0.28% higher, the CAC up +0.70%, while the FTSE100 closed +0.28% higher.
German IFO Business Climate (MoM)
Australia
The ASX200 is expected to open slightly higher on Monday, with ASX200 futures up +4 basis points or +0.053% at 7,605. The index closed +0.42% higher on Friday, led by gains in the information technology and consumer discretionary sectors which finished +1.51% and 1.49% higher, while the Australian dollar was relatively unchanged at -0.06%.
In stocks on Friday, Block, owner of Afterpay, rose 16.5% on the back of announcing a December quarter revenue that beat analysts’ expectations. While Aussie Broadband finished 18.6% higher after it beat forecasts for internet subscriber and profit growth.
In local economic data this week, investors will be focusing on the latest monthly CPI indicator scheduled to be released on Wednesday, with the markets forecasting a reading of 3.6% an increase on the previous 3.4%. To round off the week, investors will be keeping an eye on the latest retail sales data on Thursday which is expected to show retail sales rose +1.6% on the month.
Commodities
Oil prices were lower at the close, as demand concerns grew on the back of comments from Fed officials suggesting rates might stay higher for longer, with WTI crude and Brent falling -2.70% and -2.05% to US$76.49 and US$81.62 a barrel. Iron ore futures in Singapore rose +0.30% on Friday to US$120.04 and are relatively unchanged at -0.03% this morning, while copper fell -0.44%. Gold rose +0.54% at US$2.035.40 an oz with silver +0.88% higher, while Bitcoin fell -1.30% on Friday and rose +1.40% over the weekend to finish at 51,695.29.
Economic Calendar
26th February 2024
No Major Data
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
