Wednesday's Markets Update (January 10, 2024)

10 Jan 2024 by rate3

On Wednesday, Nasdaq, Dow and SP indexes edged up as traders remained cautious ahead of key inflation data and the start of earnings season. Consumer discretionary and tech led gains while energy lagged. NVIDIA, Microsoft, and Meta rose to multi-week highs, while Exxon and Chevron dropped to 4-week lows. On a crypto side, SEC approved the spot BTC ETF. ETH is surging ahead with a +5% gain, breaking 2.5K resistance, leading the charge in the cryptocurrency market. Following behind is BTC, which has posted a more modest increase, reaching to 46.6K.

Details

Wholesale inventories fell 0.2% in November, the second straight monthly decrease, led by a 0.5% drop in nondurables such as chemicals, apparel, and groceries. Durable goods inventories were flat for the second month, with increases in some categories offset by declines in others. Wholesale inventories were down 3% year-over-year.
Mortgage applications jumped 9.9% in the first week of 2023, the most in a year, rebounding after a 10.7% previous slump as expectations grow of a Fed rate cut in Q1, pushing mortgage rates down from October highs and spurring demand especially for refinances, up 19%, while purchase applications rose 6%.

World Markets

Chinese stocks fell to over 3-year lows as lack of aggressive stimulus weighed, with the Shanghai Composite down 0.54% and Shenzhen Component off 0.55%; investors await economic data amid bets authorities will have to ease policy further to combat deflation and spur recovery. Wantai, Changan, Muyuan Foods, Ganfeng Lithium and Shenzhen Silver saw notable declines.
European shares closed moderately lower as ECB comments highlighted weak growth outlook but need for further evidence of declining inflation before rate cuts, weighing on equities. Financial companies were among the worst hit, with Santander, Allianz, BNP Paribas, AXA and Flutter Entertainment posting notable declines.
The Baltic Exchange's main sea freight index fell for the third straight day to a over 2-month low at 1,664 points on Wednesday, with the capesize, panamax and supramax indices all declining due to seasonally weak demand around the Lunar New Year holiday. The capesize index saw its biggest daily drop since December 7th.
Ukraine's annual inflation rate stayed at 5.1% in December 2023, the lowest since 2020, with a slowdown in most sectors except for a rise in food & non-alcoholic beverage prices; monthly consumer prices increased by 0.7%.
Belarus's annual inflation rate rose to 5.8% in December 2023, the highest since March, as consumer prices increased most for services (8.1%) and food (6.8%), while non-food goods rose just 2.9%. On a monthly basis, consumer prices were up 0.9%.
Ghana's annual inflation rate eased for the fifth consecutive month to 23.2% in December, the lowest since March 2022, on slowing food and non-food price growth. However, inflation remains well above the central bank's 6-10% target range. On a monthly basis, consumer prices rose 1.2% in December after increasing 1.5% in November.
The Philippines saw a 29.6% annual drop in foreign direct investment (FDI) to USD 0.66 billion in October, with declines across all major components like debt instruments, equity capital and reinvestment of earnings. For the first 10 months of the year, FDI net inflows fell 17.5% year-on-year.

Commodities

Natural gas futures fell over 6% from an 8-week high to below $3/MMBtu on Wednesday despite forecasts for extremely cold weather next week driving record demand. Traders expect lower gas usage on the January 15 holiday to limit demand. Additionally, a projected storage surplus and forecast return to warmer temperatures on January 23-24 weighed on prices, after a jump to colder than normal from January 13-22.

Comment: On Ghana's High Inflation.

The high inflation rate in Ghana in December 2023 can be attributed to several factors. Prices rose significantly in the categories of housing, water, electricity, gas, and other fuels, up 82.34% year-on-year, as well as furnishings and household equipment, and transport. Food and non-alcoholic beverages inflation was also high at 59.71% year-on-year

The country's worst economic crisis in a generation, the slumping cedi currency, government spending cuts, and central bank interest rate hikes have all contributed to the high inflation. Additionally, the gradual deceleration in overall inflation is primarily attributed to base effects compared to the previous year. These factors, along with aggressive monetary policy tightening, have influenced the high inflation rate in Ghana compared to other African countries and even to the war-affected Ukraine.

Comment: On the Philippine's FDI decline.

The Philippines' foreign direct investment (FDI) inflows have lagged behind its regional peers in the Association of Southeast Asian Nations (ASEAN) since 2010. In 2022, the FDI inflows shrank to USD 9.2 billion, down 23% from the previous year. (re: 1, 2)

Compared to Indonesia and Malaysia, the Philippines has faced challenges that have made it less attractive to foreign investors. Some of these challenges include closed sectors of the economy to 100% foreign ownership, poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, a complex judicial system, and barriers to doing business such as traffic congestion.

Time and time again, we can see that, independent of geography, the further government bureaucrats stay out of the economy, the better it performs.