Market recap: Week of 29 Jan—02 Feb 2024

Let's take a look at what went down in our market recap this week, as we navigate through the latest updates on inflation, consumer spending, labor market trends, earnings reports, and more, providing you with a comprehensive overview of the ever-evolving economic landscape.

Personal consumption expenditures

CNBC: Federal Reserve's favourite inflation gauge rose 0.2% in December

• Markets relatively unaffected by recent data, as indicated by minimal movement in stock futures and mostly lower Treasury yields. 
• December’s core personal consumption expenditures (PCE) price index rose by 0.2% monthly and 2.9% annually, a key metric for the Federal Reserve. 
• Consumer spending surpassed estimates, growing by 0.7%, while personal income growth slightly decreased to 0.3%, aligning with forecasts. 
• The Federal Reserve favours the PCE for its ability to account for changes in consumer purchasing patterns. 
• Anticipations suggest Fed policymakers will maintain current interest rates during this week’s session.

Bitcoin updates

KITCO: A ‘bad recession’ is risking Bitcoin price to fall, analyst said

• With just over two weeks since the approval of 11 spot Bitcoin Exchange-traded funds and millions of inflows, the price of Bitcoin is down around 14% off its recent highs.
• Grayscale Bitcoin Trust (GBTC) is selling bitcoin — a lot of smart money bought ahead of this news.
• Following the spot Bitcoin ETFs approval by the US Securities and Exchange Commission, assets under management (AUM) of those funds beat that of silver ETFs. Spot Bitcoin ETFs' AUM is currently around $25 billion, while silver ETFs are at about $11.5 billion in assets.
• BlackRock and Fidelity have dominated the Bitcoin-ETF flow race, with about $2.1 billion and $1.8 billion of inflow.

US inflation

The Wall Street Journal (WSJ): Plummeting inflation raises new risk

• The Fed won’t cut at its two-day meeting ending this Wednesday, 31 Jan, because the economy has been growing solidly.
• Inflation, excluding food and energy, on a monthly basis has been at or below 2% in six of the last seven months.
• The Fed wants to ensure sustainable conditions before cutting rates.
• If inflation has sustainably returned to the Fed’s 2% target, real rates might be restricting economic activity too much.
• Officials could wait until May or even later to cut rates, according to William English, a former senior Fed economist now at Yale School of Management.

EUR / USD

Bloomberg, PIMCO, and Pound Sterling

ECB’s Kazimir: June more likely than April for first European Central Bank (ECB) cut

• ECB won’t rush into cutting interest rates to avoid undoing progress on inflation, says Governing Council member Peter Kazimir. June is more likely than April for a first move.
• According to PIMCO, ECB proceeding with caution initially, wanting to ensure victory against inflation and possibly waiting for signs of wage disinflation. However, they see rates trending downward.
• HSBC forecasts Euro-Dollar at 1.06 by the end of Q1 2024, dropping from the current spot level of 1.0950. Predictions include 1.04 by mid-2024, 1.02 by the end of Q3, and 1.02 by year-end.

Labour market

The Wall Street Journal and Morning Star

WSJ: Job quitting fell, bad news for the economy

• Workers called it quits less frequently in 2023, indicating declining confidence in the labour market amid expectations of a slowing US economy and prolonged job searches.
• Americans quit 6.1 million fewer jobs last year compared to 2022, marking a 12% decline.
• “On the surface things look really good and robust but when you dig deeper it’s a labour market that is being driven by a narrower set of industries and is showing signs of substantial slowing,” said Brett Ryan, senior US economist at Deutsche Bank.
• Dow Jones Industrial Average (DJIA) gained 133 points to 38467, while the S&P 500 slipped 2 points to 4924, and the Nasdaq dropped 0.8% to 15509.

Earnings reports

Nasdaq

Reuters: Microsoft beats quarterly revenue estimates

• Microsoft shares experienced a 1% decline in volatile after-hours trading, followed by a slight rise, despite a remarkable 57% surge last year.
• Alongside a tech stock rally involving Alphabet (GOOGL.O) and Nvidia (NVDA.O), Microsoft played a pivotal role in driving a 24% increase in the S&P 500 (SPX) in 2023.
• Revenue for Microsoft grew by 18% to $62 billion in the quarter ending Dec. 31, surpassing the average analyst estimate of $61.12 billion, per LSEG data.
• Google-parent Alphabet (GOOGL.O) also surpassed expectations with fourth-quarter revenue reaching $86.31 billion, compared to estimates of $85.33 billion, according to LSEG data.

Economic outlook

Federal Reserve, CNBC TV, and the Wall Street Journal 

Fed: Keep rate unchanged

• US Fed maintains rates at 5.25-5.5%, signalling stability. 
• Recent indicators point to robust economic expansion and resilient job gains.
• Fed commits to further reduce holdings of Treasury securities and agency debt. 
• Powell emphasizes close monitoring of economic indicators, ready to adjust policy for emerging risks. 
• No rate cut expected in March, according to signals from Powell during the press conference.
• Stock indexes close lower; Nasdaq drops over 2%, S&P 500 falls 1.6%, Dow down 0.8%. 
• Despite the decline, all three indexes show a third consecutive month of gains.

Silver market

Kitco 

Silver Institute: Silver market to see record physical demand in 2024

• Global silver demand expected to reach 1.2 billion ounces in 2024, per The Silver Institute. 
• Industrial silver demand projected to rise by 4% this year, reaching a record 690 million ounces. 
• Jewelry consumption anticipated to increase by 6% in India, driving growth in the sector. 
• Weaker investment in silver expected to be temporary; analysts foresee recovery once Fed begins rate cuts in mid-2024.

UK monetary policy

CNBC & UKFT

CNBC: BOE hints market could be right on rate cuts

• Bank of England keeps rate steady at 5.25%, Governor Bailey hints at potential rate cuts.
• Investors anticipate four rate cuts by year-end, with rates possibly dropping to 4.25%.
• UK Government announces record increase in National Living Wage to £11.44 per hour from April 2024.
• Monetary Policy Committee vote splits 6-3, reflecting differing opinions on inflation and monetary policy direction.

Economic optimism

CNBC 

CNBC: Survey shows US business owners are more optimistic

• 75% of small business owners feel optimistic about 2024 financial outlook, up from 68% last year, per Goldman Sachs survey.
• “There’s growth opportunities... demand for authentic brands and services is there,” says Bommarito.
• Economic optimism linked to anticipated rate cuts by Federal Reserve, says Wall Street.

Thank you for joining us in this week's market recap.

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Disclaimer:

The information contained in this blog is for educational purposes only and is not intended as financial or investment advice. It is considered accurate and correct at the date of publication by the sources. Changes in circumstances after the time of publication may impact the accuracy of the information.

The performance figures quoted refer to the past, and past performance is not a guarantee of future performance or a reliable guide to future performance.

We recommend you do your own research before making any trading decisions.

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