Weekly market update - 9th of February 2024
Written and accurate as at: Feb 09, 2024 Current Stats & Facts
In the past week, the financial markets were significantly influenced by a host of economic data and corporate earnings reports from the United States, further accentuated by the outcomes of the Federal Open Market Committee's (FOMC) meeting and Chairman Powell's subsequent press briefing.
The U.S. earnings season has aligned with historical patterns, with notable positive receptions for the earnings reports from five of the "Magnificent Seven" companies, particularly highlighted by Meta's robust performance that topped off the week.
Throughout the week, U.S. economic indicators largely met expectations, bolstering the prospects of a 'soft landing', until the unexpected surge in the Non-Farm Payroll figures on Friday raised doubts about the likelihood of an interest rate cut in March. Chairman Powell had previously clarified during the FOMC press conference that a rate reduction in March was not a primary expectation of the Federal Reserve.
The commodities market experienced a downtrend, with oil prices relinquishing the previous week's gains, which has recalibrated expectations for rate adjustments in 2024 to more moderate levels.
The S&P/ASX 300 index saw an uplift of 1.82%, while the S&P 500 index increased by 1.34%.
Interest Rates
The Federal Reserve omitted its prior statement regarding "any additional policy firming that may be appropriate", instead emphasising its commitment to "carefully assess incoming data, the evolving outlook, and the balance of risks" in determining future interest rate adjustments. Chairman Powell expressed scepticism about the Federal Reserve's ability to gain sufficient confidence by March to justify a rate cut.
Market attention is now primarily focused on the potential for a rate reduction at the May 24 meeting, allowing the Federal Reserve time to review additional economic indicators, including three rounds of PCE, CPI, PPI, and employment data, along with the first quarter's employment cost index (ECI).
In the UK, the Bank of England maintained its interest rates with a vote of 6-3, aligning with predictions; two members voted for an increase, while one supported a reduction.
U.S. Economic Indicators
The week was pivotal for labour market data, with several key reports:
- JOLTS: Job openings in December exceeded expectations, highlighting a steady quit rate, a critical indicator for the ECI, the Fed's preferred measure of wage inflation.
- ADP Employment: Private payroll growth was below expectations, indicating a slowdown.
- ECI: The fourth quarter saw a deceleration in wage growth, suggesting potential moderation in wage inflation.
- Initial Jobless Claims: There is a slight increase in claims, with expectations of further rises, albeit low by historical standards.
- Non-farm Payrolls: Surprisingly robust job growth in January almost doubled consensus expectations, challenging the anticipation of imminent rate cuts.
Australian Economic Overview
- Consumer Price Index (CPI): The December quarter's CPI was below expectations, with year-on-year growth also falling short of the Reserve Bank of Australia's (RBA) predictions, influenced by electricity subsidies and tradable goods disinflation.
- Retail Sales: December saw a significant drop in retail trade, with a notable decline across various sectors.