Friday's Markets Update (February 16. 2024)

17 Feb 2024 by rate3

On Friday, PPI unexpectedly increased, and major stock indexes fell on concerns about delayed Fed rate cuts. The real estate, tech, and consumer discretionary sectors underperformed. The Japanese economy entered a technical recession, while oil prices increased on OPEC+ decision. Soybean prices hit a 2-month low after an increased stocks forecast. The crypto market continued its sideways movement, with BTC (+52K) and ETH (+2.8K) wavering at their 2-year highs. At the same time, altcoins' bulls used that pause to push major coins higher, with BNB, Algorand, and Polygon continuing their 2-day surge by adding another +2.5%.

Details

Producer prices (PPI) rose 0.3% in January, the largest monthly increase in five months, driven by a 0.6% surge in service costs. Goods prices fell 0.2%, with gasoline dropping 3.6%. Year-on-year, PPI increased 0.9%, while core PPI rose 0.5% monthly and 2% annually, both above estimates.(BLS)
Housing starts dropped 14.8% in January 2024 to 1.331 million, the lowest since August, missing forecasts. Single-family starts fell 4.7%, and multi-unit starts plunged 35.8%. All regions experienced declines.(CB)
The University of Michigan consumer sentiment rose to 79.6 in February, a fresh high since July 2021 but below forecasts. Expectations improved, while current conditions dipped slightly. Inflation expectations for the year ahead increased to 3% and remained at 2.9% for the five-year outlook.(UM)

World Markets

European stocks closed higher, with the Eurozone’s Stoxx 50 reaching a 23-year high and the broader Stoxx 600 jumping to ATH. Tech shares, led by ASML, and industrial companies, including Safran, BASF, and Air Liquide, fueled the gains. Additionally, ECB member de Galhau emphasized the rationale for an initial interest rate cut, while NatWest surged over 7% following strong results and a new CEO appointment.
Japan's Q4 2023 GDP unexpectedly shrank by 0.1%, missing forecasts and leading to a recession. Private consumption declined for the third consecutive quarter, capital expenditures were muted, and public investment decreased. However, net trade contributed positively due to stronger export growth.(Esri)
The CBR kept its key rate at 16% in February, halting a series of hikes. Inflation has eased to 6.6% annually, and the CBR predicts it will fall below 4.5% by year-end, nearing the 4% target. Despite this, inflation risks remain, and the economy, impacted by sanctions and labor shortages due to mobilization, grew by 3.6%, above expectations.(CBR)

Commodities

WTI crude futures hit a 3-months high at $79.19, supported by Middle East tensions, OPEC+ supply cuts, and a weaker dollar. However, the IEA warned of slowing global oil demand, revising its 2024 forecast downward, and anticipating a larger supply increase.
Soybean futures are bearish at $11.7 per bushel, near the lowest levels since December 2020, due to increased US grain stocks forecast. Weakened Chinese demand, strong South American competition, and favorable rainfall in Argentina and Brazil contribute to the negative outlook.

On Week 8, investors will focus on FOMC minutes and global flash PMIs, including the US, Eurozone, Germany, France, UK, Japan, and India. Germany's Ifo Business Climate, Turkey's interest rate decision, and Canada's inflation rate will also be closely watched.