Monday's Markets Update (January 29, 2024)

29 Jan 2024 by rate3

On Monday, the Dallas Fed Index hit an eight-month low, and traders reacted by pushing stocks higher, with the S&P 500 and Nasdaq reaching new heights. Tech and consumer staples gained, while energy lagged. Meta hit an all-time high. However, most traders caution anticipating the Fed decision and 19% of the S&P 500 reporting this week. On a world's stage, China's industrial profits declined due to a weakening economy. Oil, gold, and silver are on the rise following Houthi rebels' missile attacks. The crypto market is in deep green, with Cardano outperforming the rest of the major tokens, adding more than 7%. Solana and Polkadot increased more than 5%, while Chainlink, Avalanche, and Polygon made +3%. BTC and ETH lagged the overall market with under 3% growth.

Details

The Dallas Fed's manufacturing index dropped to -27.4 in January 2024, indicating a deeper contraction. The production index hit its lowest since mid-2020, while new orders and shipments also declined. Employment fell to its lowest since mid-2020. Despite this, wage and input costs continued to rise while selling prices remained flat. However, future production index increased to 21.7, suggesting optimism for future growth. Most other forward-looking indexes also improved. (Dallas Fed)

Crypto

Crypto-focused funds globally experience a significant $500 million in net weekly outflows, primarily linked to Grayscale's bitcoin ETF transition. Grayscale's GBTC sees a $2.2 billion net outflow, overshadowing $1.8 billion inflows into new U.S. bitcoin ETFs. The United States, Switzerland, and Germany, with outflows totaling USD 409M, 60M, and 32M respectively, lead the global outflows. Bitcoin, Ethereum, Polkadot, and Chainlink witness notable outflows, raising concerns across the crypto investment landscape. (source).
Binance's survey in France, Italy, Spain, and Sweden shows strong bullish sentiment among European investors in the face of recent crypto volatility. 73% express optimism about crypto's future, with 55% exclusively engaging in digital assets. High returns (20%), decentralization (18%), and innovation (17%) are cited as key adoption drivers. Additionally, 55% use cryptocurrencies for daily transactions.(source)

World Markets

Shanghai Composite drops 0.92% to 2,883, and Shenzhen Component falls 2.06% to 8,582 as healthcare and tech stocks decline. US bill proposing a ban on Chinese biotech firms collaborating with the US government raises concerns, impacting sectors like semiconductors and AI. WuXi Apptec, Zhongji Innolight, and TCL Zhonghuan lead losses. Chinese regulators suspend lock-up share lending for short selling to stabilize equity markets.
China's industrial profits decline 2.3% YoY to CNY 7,685.83 billion in 2023, marking a second consecutive annual fall amid economic challenges. State-owned firms see a softer profit shrinkage (-3.4%), while the private sector experiences growth (2.0%). Specific sectors, including chemical manufacturing, face notable declines, while others, such as ferrous metal smelting, show substantial profit increases. In December, industrial profits rise by 16.8% YoY, marking the fifth consecutive monthly increase.
Ibovespa fell 0.5% below 128,400 due to caution before monetary decisions by Brazil's central bank and the US Fed. Vale's shares dropped 1.8% amid management concerns and Evergrande's impact, affecting the mining sector. Gol faced the day's worst performance, impacted by US judicial issues and a credit downgrade. Meanwhile, Magazine Luiza rose 2.8% following a R$1.25 billion private capital increase.
Pakistan's central bank maintains a 22% key interest rate for the fifth time, citing improved external accounts and increased reserves. Inflation, expected to decline faster from March, is projected at 23%-25%, with a medium-term target of 5%-7% now set for September 2025. The GDP growth target remains 2%-3%.
Zimbabwe's annual inflation rises to a ten-month high of 34.8% in January 2024, up from 26.5% in December. Food, services, and currency depreciation contribute, with the local unit losing over a third of its value against the dollar this year. Monthly consumer prices surge by 6.6%, the highest in seven months.

Currencies

The dollar index rose to 103.7, approaching mid-December levels, as traders anticipated the Fed's policy decision. Focus is on potential hints about the timing and pace of interest rate cuts. Betting odds for a 25bps rate cut in March and May are approximately 49% and 50%, respectively. Increased buying against the Euro is driven by expectations of ECB rate cuts in April. The dollar also strengthened against the British pound ahead of the Bank of England's decision.
The Indian rupee hovers around 83.1 per USD, slightly weaker than a mid-January high. Traders await the federal budget for potential reforms, with the Finance Ministry optimistic about 7%+ growth, backed by structural reforms. The central bank intervenes to prevent the rupee from falling below its record low of 83.4.

Commodities

Gold rises to nearly $2,030/ounce amid Middle East tensions. Houthi rebels' missile attack on an oil tanker and drone attack on US forces drive safe-haven demand. Cautious investor sentiment prevails ahead of the US Federal Reserve's policy decision, with expectations of a steady interest rate. Strong US economic data and hawkish Fed comments reduce the likelihood of a March rate cut to 48%, down from 86% in December.
Silver prices steady near $23/oz as investors await Fed meeting and US economic data, including jobs report. Traders hope for signs of a cooling labor market and softer Fed tone. Silver remains supported by geopolitical risks in Middle East, including attacks on US service members and commercial shipments.