Forex Forex News from InstaForex

NZ DOLLAR DROPS AGAINST MOST MAJORS



The New Zealand dollar weakened against most major currencies in the Asian session on Tuesday.

The NZ dollar fell to a 1-week low of 89.89 against the yen, from yesterday's closing value of 90.34.

Against the euro and the U.S. dollar, the aussie dropped to near 5-week lows of 1.7721 and 0.6160 from Monday's closing quotes of 1.7655 and 0.6199, respectively.

If the kiwi extends its downtrend, it is likely to find support around 88.00 against the yen, 1.79 against the euro and 0.60 against the greenback.

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CHINA GDP GAINS 5.2% ON YEAR IN Q4



China's gross domestic product expanded 5.2 percent on year in the fourth quarter of 2023, the National Bureau of Statistics said on Wednesday - shy of expectations for 5.3 percent but up from 4.9 percent in the third quarter.

On a seasonally adjusted quarterly basis, GDP rose 1.0 percent - in line with expectations and slowing from 1.3 percent in the three months prior.

Also, the NBS said that industrial production climbed 6.8 percent on year, beating forecasts for 6.6 percent - which would have been unchanged from the November reading.

Retail sales grew an annual 7.4 percent, missing forecasts for 8.0 percent and down from 10.1 percent in the previous month.

Fixed Asset Investment was up 3.0 percent on year, beating forecasts for 2.9 percent, which would have been unchanged.

The jobless rate in China was 5.1 percent in December versus forecasts for a steady reading of 5.0 percent.

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NZ DOLLAR RISES AGAINST MAJORS



The New Zealand dollar strengthened against other major currencies in the Asian session on Thursday.

The NZ dollar rose to a 6-day high of 90.81 against the yen and a 3-day high of 1.0692 against the Australian dollar, from yesterday's closing quotes of 90.61 and 1.0703, respectively.

Against the U.S. dollar and the euro, the kiwi edged up to 0.6137 and 1.7765 from Wednesday's closing quotes of 0.6116 and 1.7779, respectively.

If the kiwi extends its uptrend, it is likely to find resistance around 91.00 against the yen, 1.05 against the aussie, 0.63 against the greenback and 1.74 against the euro.

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YEN FALLS AGAINST MAJORS



The Japanese yen weakened against other major currencies in the Asian session on Friday.

The yen fell to more than a 1-1/2-month low of 161.62 against the euro and nearly a 2-month low of 188.62 against the pound, from yesterday's closing quotes of 161.10 and 188.22, respectively.

Against the U.S. and the Canadian dollars, the yen dropped to a 2-day low of 148.48 and more than a 2-month low of 110.06 from Thursday's closing quotes of 148.15 and 109.84, respectively.

The yen edged down to 171.00 against the Swiss franc, from yesterday's closing value of 170.64.

If the yen extends its downtrend, it is likely to find support around 164.00 against the euro, 190.00 against the pound, 151.00 against the greenback, 112.00 against the loonie and 173.00 against the franc.

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Oil Loses Altitude: How the Economic Downturn Affects the Market



Brent crude oil futures dropped by 14 cents, or 0.2%, to $79.92 per barrel by 01:25 GMT, while West Texas Intermediate (WTI) crude oil futures last declined by 10 cents, or 0.1%, to $74.66 per barrel.

Both contracts had risen by approximately 2% on Monday as a Ukrainian drone strike on Novatek's fuel terminal in Ust-Luga raised supply concerns and led to a price surge. Analysts suggest that Novatek is likely to resume full-scale operations within a few weeks.

While the damage to loading docks at the Ust-Luga terminal only "briefly impacted exports," this move increases the likelihood of the Russian-Ukrainian conflict "shifting into a new phase, with both sides targeting key energy infrastructure," stated analysts at ANZ Research in their report.

Geopolitical tensions were overshadowed by ongoing concerns about the slowdown in China's economic recovery, raising worries about global oil demand, given that the Asian giant is the world's largest crude oil importer.

China has implemented measures to support its economy, but domestic consumption remains sluggish, making oil traders nervous about demand prospects.

In the Middle East, the United States urged Israel to protect innocent people in hospitals, medical staff, and patients as Israeli forces assaulted one hospital and besieged another, advancing into the western Khan Yunis sector in Gaza.

American and British forces also conducted a new round of strikes on the Houthi rebels' underground storage and missile and reconnaissance capabilities linked to Iran.

Houthi attacks on ships in the Red Sea region have disrupted global navigation and heightened concerns about inflation. The group claims their attacks are in solidarity with Palestinians when Israel strikes Gaza.

Additionally, crude oil inventories in the United States are expected to decrease by approximately 3 million barrels by January 19. Distillate stocks were anticipated to decrease last week, while gasoline stocks are expected to increase.

Managers seem to conclude that ongoing economic growth in the United States will continue to exert pressure on prices, while the conflict in the Middle East will provide some support to prices in Europe and Asia.

Funds appear to be betting on contrasting economic outlooks between the ongoing U.S. economic growth and a protracted recession in Europe.

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Global oil game: new rounds in light of events in the USA and China



This trend was reflected in the increase in the March Brent crude oil contract price by 0.3%, reaching $80.24 per barrel. A similar dynamic was observed with West Texas Intermediate crude, which appreciated by 0.3% to $75.31 per barrel.

Toshitaka Tadzawa, an analyst at Fujitomi Securities, emphasized the role of the decrease in U.S. oil reserves and expectations regarding China's economic upswing as the main factors fuelling oil price growth. He also noted that political instability in the Middle East is encouraging investors to buy oil.

According to the U.S. Energy Information Administration, crude oil inventories decreased by 9.2 million barrels, far exceeding the analysts' forecast of 2.2 million barrels. This decrease was due to a reduction in imports and the closure of refineries due to bad weather, which restricted vehicle movement.

The Chinese economy also impacted the oil market. The People's Bank of China announced a significant reduction in the bank reserve requirement ratio, suggesting an injection of about $140 billion into the economy, potentially a strong boost for economic growth.

An important aspect was the decrease in U.S. domestic oil production. Bob Yager, Director of Energy Futures at Mizuho, notes that production in Bakken was particularly affected, experiencing a significant drop.

Amid Arctic freezes, U.S. oil production fell to a five-month low of just 12.3 million barrels per day. Officials from North Dakota stated that restoring oil production in the state, a key player in shale extraction, might take about a month following severe damage caused by extreme weather conditions.

Thus, events in both the U.S. and China are shaping new trends in the global oil market, demonstrating the interplay of economic strategies and natural phenomena in today's global economy.

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Two sides of the market: record growth of the S&P 500 and the Tesla crisis



U.S. Economic Strength: Surpassing Expectations
The U.S. economy demonstrated remarkable growth, surpassing all forecasts in the fourth quarter. This rise was a surprise to experts, highlighting the resilience of the country's economic dynamics.

Comcast and American Airlines: Symbols of Growth
Comcast reported revenues exceeding expectations, contributing to the rise in their stocks. Meanwhile, American Airlines also pleases investors with an optimistic profit forecast, demonstrating the health of the aviation industry.

S&P 500 Index: At the Peak of Success
The S&P 500, reflecting the overall market trend, grew by 0.53%, reaching a historical high for the fifth session in a row. This record growth is backed by investors' confidence in the U.S. economic potential.

Global Market in the Rhythm of the American Economy
Global stocks rise on the wave of American economic growth. At the same time, the euro loses positions, reflecting the European Central Bank's decision to keep interest rates unchanged.

U.S. Economy: Impressive GDP Growth
The U.S. Gross Domestic Product in the fourth quarter showed an impressive 3.3% annual growth. This significantly exceeds forecasts, disproving fears of a possible recession in 2023.

Tesla: Challenges Amidst Overall Growth
In contrast to the general market optimism, Tesla faces problems. After the publication of a disappointing sales forecast, the company's stocks fell, standing out against the general market upswing.

S&P 500: New Horizons of Growth
The rally of the S&P 500 index continues, marking a new record high reached for the first time in two years. This indicates investors' optimism regarding the future of the American economy and reduced interest rates, as well as growing interest in artificial intelligence.

GDP a Pleasant Surprise for the Market
Rob Haworth from U.S. Bank Asset Management Group emphasized that the U.S. GDP growth is a pleasant surprise for the market. The absence of inflation issues and active consumer spending create a favorable environment. This circumstance strengthens confidence that companies' revenues and sales will grow in the future.

Unemployment Level: A Slight Increase in Claims
Recent data indicate a slight increase in the number of unemployment benefit claims, reaching 214,000, slightly exceeding the forecast of 200,000. This points to minor fluctuations in the labor market.

Tech Giants: Awaiting Quarterly Reports
The upcoming quarterly reports from Apple, Microsoft, Amazon, Alphabet, and Meta Platforms will provide investors valuable insight. This will help assess whether the high valuations of these companies are justified after their stock growth since the crisis on Wall Street in 2022.

Dow Jones, S&P 500, and Nasdaq: The Rise Continues
The Dow Jones Industrial Index showed significant growth, adding 242.74 points. S&P 500 and Nasdaq also increased, indicating the continuing rise in the market.

Global Market: Steady Growth
At 16:14 Eastern European Time (214 GMT), the global MSCI stock index, reflecting dynamics in 49 countries, rose by 0.32%. The European STOXX 600 index also closed with a 0.3% increase, confirming a stable positive trend in the global economy.

Electric Vehicles: Stock Fall After Tesla's Report
Following the publication of Tesla's quarterly report, shares of other electric vehicle manufacturers also suffered. Rivian Automotive and Lucid Group recorded a decrease in their shares by 2.2% and 6.7% respectively, reflecting overall concern in the sector.

Healthcare Sector: Drop in Humana's Shares
Humana's shares sharply fell by 11.7%, following the forecast of modest annual profits, which impacted the S&P 500 healthcare sector index, decreasing it by 0.2%. This reflects current challenges in the health insurance sector.

UnitedHealth and Cigna:
Falling Following Humana Following Humana, shares of other health insurers also incurred losses. UnitedHealth and Cigna showed a decrease of 3.9% and 2% respectively, highlighting instability in this market segment."

IBM and Comcast: Stock Growth Following Positive Forecasts
IBM shows impressive stock growth of 9.5%, thanks to a revenue forecast that exceeds expectations. Comcast's shares also rose by 3.4% after the company surpassed quarterly revenue forecasts.

American Airlines: Sharp Rise in Shares
Shares of American Airlines sharply increased by 10.3%, thanks to a very optimistic annual revenue forecast, which is a good sign for the aviation industry.

S&P 500: Earnings Surpass Expectations
According to the latest data, 82% of the companies in the S&P 500 index that have reported their earnings have exceeded expectations. This is significantly higher than the long-term average of 67%, indicating an overall positive sentiment in the market.

Boeing: Stock Decline Due to FAA Ban
Boeing's shares noticeably fell by 5.7%, following the decision of the U.S. Federal Aviation Administration to prohibit the company from expanding the production of 737 MAX models due to technical issues.

S&P 500 Index: Predominance of Growth Over Decline
The S&P 500 index exhibited a positive ratio of rising to falling stocks, at 4 to 1, indicating a prevailing upbeat trend in the market.

Indices Hitting New Highs and Lows
The S&P 500 recorded 50 new highs and only two new lows, while Nasdaq registered 97 new highs and 119 new lows, reflecting the current market's volatility.

Trading Volume:
Market Stability The trading volume on U.S. exchanges remained consistent, reaching 11.5 billion shares, in line with the average level of the last 20 sessions.

The U.S. Dollar Strengthens, Euro Weakens
The U.S. dollar showed an increase, signaling the Federal Reserve's reluctance to lower interest rates. Concurrently, the euro hit a six-week low against the dollar following the European Central Bank's statement about maintaining high interest rates.

Oil and Gold: Price Increase
U.S. oil prices reached their highest since late November, with futures for West Texas Intermediate and Brent crude oil rising by 3% and 2.99% respectively. Gold prices also saw an increase, with a 0.32% rise in spot prices.

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S&P 500 peaks: hopes for upcoming Fed meeting and tech profits



U.S. stock indices showed growth on Monday. Investors prepared for a busy week, expecting a large number of financial reports from high-market-cap companies, new economic data, and a Fed meeting dedicated to monetary policy. All three major U.S. stock indices showed growth, with the high-tech Nasdaq (.IXIC) index growing the most. The S&P 500 index (.SPX) reached a new record closing level. After the main index rose by 3.3% in the first month of 2024, BlackRock revised its assessment of U.S. stocks, raising it.

In anticipation of upcoming reports, investors' attention is focused on high-profile companies in technology and related sectors. A number of key companies, including Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O), and Qualcomm Inc (QCOM.O), are preparing to publish their financial results, starting from Tuesday and peaking on Thursday with reports from giants such as Apple Inc (AAPL.O), Amazon.com (AMZN.O), and Meta Platforms Inc (META.O). Also of interest are the results of other significant companies: General Motors Inc (GM.N) on Tuesday, Boeing Co (BA.N) on Thursday, as well as leading oil corporations Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), which will present their reports on Friday.

The main event of the week for investors is the press conference of the chairman of the Federal Reserve (Fed) Jerome Powell and the results of the two-day meeting of the U.S. central bank, scheduled for Wednesday. Additionally, the publication of U.S. unemployment data is expected on Friday. There is speculation that the Fed will maintain its key interest rate at 5.25%-5.50%. However, some investors do not rule out that the central bank may deviate from its plans to raise rates.

Fed Chairman Jerome Powell and other members of the policy leadership have already stated that a reduction in interest rates should not be expected until inflation falls to the annual target level of 2%. They also emphasized their readiness to take a flexible approach in response to changing economic data. The list of economic reports this week includes labor market data, including job vacancies and workforce turnover research, the ADP report, fourth-quarter employment cost data, productivity metrics, layoff plans, and the January employment report, to be published on Friday.

In addition to the aforementioned reports, this week will also see the release of the Case-Shiller home price index, consumer confidence indicators, the Purchasing Managers' Index from the Institute for Supply Management, construction spending statistics, and information on manufacturing orders. Recent positive economic data, including impressive gross domestic product and personal consumer expenditure figures released last week, have, on one hand, alleviated concerns about a possible recession, and on the other hand, reduced the likelihood of the Federal Reserve cutting interest rates soon, possibly as early as March.

The industrial Dow Jones index (.DJI) increased by 224.02 points (0.59%) to 38,333.45. The S&P 500 index (.SPX) gained 36.96 points (0.76%) to 4,927.93, and the Nasdaq Composite index (.IXIC) rose 172.68 points (1.12%) to 15,628.04. Out of the 11 sector indices of the S&P 500, ten showed growth. The largest increase was in the consumer discretionary index (.SPLRCD), which grew by 1.37%, followed by a 0.97% increase in the information technology sector (.SPLRCT). The energy sector (.SPNY) was the only one to show a decline. Microsoft (MSFT.O), a company that drew market attention to the field of artificial intelligence thanks to its partnership with Open AI in 2023, is expected to report a 15.8% increase in quarterly revenue. Its shares closed up by 1.4%.

Tesla Inc (TSLA.O) shares rose by 4.2% following the electric car manufacturer's announcement of capital investment plans. Shares of robot vacuum maker iRobot (IRBT.O) fell by 8.8% as the company and Amazon abandoned merger plans due to opposition from EU antitrust authorities. Meta Platforms (META.O) shares increased by 1.7% after brokerage firm Jefferies raised its target price from $425 to $455.

Shares of Warner Bros Discovery (WBD.O) lost 1.2%, as brokerage firm Wells Fargo downgraded the streaming platform's rating to 'equal weight'. Financial technology company SoFi Technologies (SOFI.O) shares jumped by 20.2% following the announcement of profits in the fourth quarter. On the NYSE, there were 397 new highs and 50 new lows.

On the Nasdaq, 2975 stocks rose and 1314 fell, as the number of rising stocks outnumbered falling ones by approximately a 2.3 to 1 ratio. The S&P 500 index set 45 new 52-week highs and did not find any new lows, while the Nasdaq recorded 226 new highs and 101 new lows. The trading volume on U.S. exchanges was relatively small, with 10.3 billion shares traded compared to the average of 11.5 billion shares over the previous 20 sessions.

Investors were also sensitive to geopolitical risks related to the rise in oil prices following a missile attack in Kauta, which caused a fire on a fuel tanker in the Red Sea, and a drone attack in Jordan.

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Wall Street is on the verge of change: how the US economy ignores the Fed



The current version was alarmed by evidence suggesting that the economy might be too heated for the Federal Reserve to cut rates without risking an inflation rebound. Friday's U.S. employment data served as the latest indicator of stronger-than-expected growth after Federal Reserve Chairman Jerome Powell, a few days earlier, quashed hopes that the central bank would begin to lower rates in March.

"Looking back at the fourth quarter and the recent stock rally, it can largely be attributed to the anticipation of a Fed pivot, and we are witnessing this pivot evaporate before our eyes," said Matthew Miskin, one of the chief investment strategists at John Hancock Investment Management.

The Friday employment report revealed that non-farm payroll employment increased by 353,000 last month, significantly surpassing the 180,000 growth anticipated by economists. Additionally, the economy added 126,000 more jobs in November and December than previously reported.

Many investors consider strong growth a positive sign for stocks, especially if it is accompanied by higher-than-expected corporate earnings. The S&P 500 index reached a new high on Friday following the employment data release, spurred by a sharp rise in shares of Facebook's parent company Meta Platforms (META.O) and Amazon (AMZN.O), which surged by 20% and 8% respectively after their corporate results.

In 2024, S&P 500 earnings are expected to grow by almost 10% following a 3.6% increase in 2023. These expectations will be tested in the upcoming week with another significant batch of reports, including from Eli Lilly (LLY.N), Walt Disney (DIS.N), and ConocoPhillips (COP.N).

Analysts predict a remarkable year for U.S. stocks: 2024 will end more than 10% higher at 5500 points. They attribute this growth to optimism about the business potential of artificial intelligence, which helped stocks like Nvidia (NVDA.O) last year, likely contributing to this growth.

However, sustained growth above trend poses another problem – concerns about inflation rebound.

A longer period of high interest rates could also exacerbate stress in sectors of the economy that are already suffering, such as commercial real estate.

Shares of New York Community Bancorp (NYCB.N), a major CRE lender in New York, fell in recent days, sparking broader regional banking issues after the company cut dividends and announced unexpected losses.

As the fourth-quarter earnings season continues, 230 companies in the S&P 500 index have reported. Of these, 80% exceeded Wall Street's expectations. Overall, analysts forecast a 7.8% year-over-year increase in S&P 500 earnings for the October-December period, a significant improvement from the 4.7% estimate as of January 1.

Meta Platforms shares rose 20.3% to a record level after announcing the payout of its first dividends on the eve of Facebook's 20th anniversary.

Amazon.com (AMZN.O) shares jumped 7.9% following a revenue increase in the fourth quarter as new generative artificial intelligence features in cloud computing and e-commerce spurred solid growth during the holiday season.

Regional bank shares stabilized after two days of sharp sell-offs triggered by disappointing earnings from New York Community Bancorp (NYCB.N). The bank's shares rose 5.0% on Friday, and the KBW regional banking operations index (KRX) increased by 0.2%.

The S&P 500 index rose 1.07% and closed at 4958.61 points. The Nasdaq index gained 1.74% to 15628.95 points, and the Dow Jones industrial index increased by 0.35% to 38654.42 points.

Of the S&P 500's 11 sector indexes, six rose, led by the communication services index (.SPLRCL), which gained 4.69%, followed by a 2.49% increase in the consumer services index (.SPLRCD).

Cigna (CI.N) shares increased by 5.4% after the health insurance provider raised its annual profit forecast.

Microchip Technology (MCHP.O) shares fell by 1.6% following a disappointing sales forecast from the chipmaker.

Skechers USA, a footwear manufacturer, also provided a gloomy forecast, resulting in a 10.3% drop in its shares. Shares of the largest oil company, Chevron Corp (CVX.N), increased by 2.9% after exceeding analysts' estimates.

In the S&P 500 index (.AD.SPX), declining shares outnumbered advancing ones at a ratio of 1.2 to one.

The S&P 500 set 68 new highs and four new lows; Nasdaq recorded 75 new highs and 144 new lows. Trading volume on U.S. exchanges was relatively low: 11.2 billion shares were sold compared to an average of 11.6 billion shares over the previous 20 sessions.

Accelerated growth and expectations that rates will remain at their current level for an extended period could lead to an increase in the yield on treasury bonds. Higher yields may pressure stocks as they compete with bonds for investors, and higher rates increase the cost of capital in the economy.

The yield on 10-year treasury bonds, which moves inversely to bond prices, reached 4.05% on Friday.

Investors continue to anticipate the Federal Reserve cutting rates by about 125 basis points this year. This is less than the approximately 150 basis points estimated earlier this week but still significantly more than the 75 basis points forecasted by the Fed.

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S&P 500 on the finish line: the impact of US earnings and interest rates



S&P 500: Slow gains amid expectations of interest rate changes

Tuesday brought modest gains in the S&P 500, where investors were scrupulously analyzing mixed reports from U.S. giants and evaluating statements from Fed officials looking at hints of an upcoming interest rate cut.

Minneapolis FRB head Neel Kashkari emphasized that the fight against inflation is not over, but noted its accelerating decline, pointing to data that has been largely in line with the Fed's 2% target over the past three and six months.

FRB Cleveland Chairman Loretta Mester expressed the view that a rate cut is possible under favorable developments, although she did not go into details of possible policy easing due to uncertainty around inflation.

Dynamics of shares and sectoral changes of the market

Equity dynamics were erratic throughout the day but recorded gains towards the close.

The Dow Jones Index (.DJI) jumped 141.24 points, or 0.37%, to 38,521.36. The S&P 500 (.SPX) strengthened 11.42 points, or 0.23%, to 4,954.23, while the Nasdaq Composite (.IXIC) rose 11.32 points, or 0.07%, to close at 15,609.00.

On Tuesday, U.S. Treasury Secretary Janet Yellen expressed concern about tensions in the banking sector and among commercial real estate owners, but emphasized that with the help of regulators, the situation remains under control.

The KBW Regional Banks Index (.KRX) ended the day down 1.4%, marking a 12.6% decline over the past six trading sessions. Shares of New York Community Bancorp (NYCB.N) collapsed 22.2% after the bank reported an unexpected quarterly loss due to real estate debt forgiveness for some customers, losing about 60% of its value for the week.

Meanwhile, airline stocks pushed the Dow Jones Transportation Average (.DJT) index up 2.1%, pointing to the demand for air travel. Frontier Group Holdings (ULCC.O) delighted the market by jumping 20.8% thanks to reporting reaching breakeven.

According to LSEG, more than half of the companies in the S&P 500 have already reported earnings that beat expectations 81.2% of the time. Total S&P 500 fourth-quarter earnings are projected to be up 8.1% from a year ago.

GE HealthCare Technologies (GEHC.O) rose 11.6% after posting quarterly earnings that beat expectations, fueling record gains in the healthcare sector of the S&P 500 Index (.SPXHC).

The materials sector (.SPLRCM) posted the best performance of any S&P 500 sector.

The MSCI Global Index (.MIWD00000PUS), which reflects stocks in 49 countries, rose 0.51%.

Shares of chemical giant DuPont de Nemours (DD.N) jumped 1.7%, up 7.4% after the company beat quarterly profit forecasts and also announced a $1 billion share repurchase program and a dividend hike.

Palantir Technologies (PLTR.N) soared 30.8% in anticipation of an upbeat full-year earnings forecast.

Meanwhile, shares of Eli Lilly (LLY.N) are down 0.2% despite a 2024 earnings forecast that exceeds expectations.

Shares in the semiconductor segment added to the tension on the Nasdaq Technology Market, with the Philadelphia SE Semiconductor index (.SOX) down 1%. Rambus Inc (RMBS.O) was at the epicenter of the decline, losing 19.2% after posting quarterly results.

On NYSE actively growing stocks outperformed falling ones, demonstrating a ratio of 2.6 to 1. There were 190 new highs versus 64 new lows on this floor.

The Nasdaq showed 2,721 stocks went up and 1,476 went down, with rising issues outnumbering falling ones by a ratio of 1.8 to 1. The S&P 500 marked 27 new 52-week highs versus 8 new lows, while the Nasdaq recorded 110 new highs and 122 new lows.

Total trading volume on U.S. exchanges reached 11.21 billion shares, compared with the usual average of 11.54 billion over the past 20 sessions.

Strengthening Chinese stocks and the international market

In China, authorities have taken to strengthening its stock market, leading Chinese blue chip stocks (.CSI300) to climb more than 3%. In New York, the iShares China Large-Cap ETF (FXI.P) rose 5.7% and the Golden Dragon China Index (.HXC) jumped 5.9%.

A series of statements from China's financial markets regulator and President Xi Jinping's upcoming meeting with regulators indicated Beijing's determination to combat losses in the domestic market.

State-owned investment fund Central Huijin Investment announced it is expanding its investment in ETFs.

China's blue chips hit a five-year low last week amid a slowing economy, prompting state investors, known as the "national team," to step up purchases of ETFs tracking shares of leading companies to support the market.

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Global challenges: rising oil prices in response to the Gaza crisis and data from the United States



On Thursday, oil prices surged more than 3% due to concerns about the potential expansion of conflict in the Middle East after Israel rejected a ceasefire offer from HAMAS.

The price of Brent crude oil increased by $2.42 to $81.36 per barrel, while West Texas Intermediate crude rose by $2.36 to $76.22 per barrel. As a result, the cost of Brent surpassed the $80 mark, and WTI exceeded $75 per barrel for the first time in February.

The escalation of the situation affects the rise in oil prices, with Brent and WTI prices expected to increase by more than 5% over the week.

"We are watching further developments, assessing potential consequences," said John Kilduff from Again Capital LLC, highlighting the impact of attacks by Houthi rebels supported by Iran on global oil trade.

For peace agreement discussions, HAMAS representatives arrived in Cairo, where they met with Egyptian and Qatari mediators.

A stronger-than-expected decrease in US gasoline and distillate inventories also supported oil prices.

Aker BP reported that production at the Johan Sverdrup field, the largest in the North Sea, would be maintained at 755,000 barrels per day until the end of the year, exceeding the initially planned 660,000 barrels per day.

According to UBS analyst Giovanni Staunovo, the demand for oil remains high among the largest consumers, including India and the US.

The US Department of Labor reported a decrease in unemployment claims, indicating the labor market's underlying strength.

IG analyst Tony Sycamore expressed that deflation risks in China, the world's largest crude oil importer, are pressuring global oil prices.

"The decline in oil prices in Asia is largely related to recent challenges in the Chinese stock markets and the unexpected consumer price index figure, undermining confidence ahead of the Lunar New Year," he added.

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US yield data raises stakes: global equities back on top



The global stock index MSCI All Country (.MIWD00000PUS) increased by 0.4%, marking its third consecutive weekly gain.

The S&P 500 index closed above 5000 for the first time on Friday, and Nasdaq briefly traded above 16,000, thanks to growth from large corporations and chip manufacturers, including Nvidia, as investors focused on artificial intelligence technologies and expected high profits.

Shares of Nvidia (NVDA.O) jumped 3.6%, reaching a record high after Reuters reported the creation of a new business unit focused on developing specialized chips for cloud computing companies and others, including advanced AI processors.

This followed a Wall Street Journal report that OpenAI CEO Sam Altman was negotiating with investors to fund a technology initiative aimed, among other things, at increasing chip production for powerful artificial intelligence.

"So far, the AI story has been about building infrastructure, chips, and data centers," said David Lefkowitz, head of US equities at UBS Global Wealth Management, adding that it "highlights potentially huge demand for AI infrastructure in the future."

Besides the 1.99% increase in the Philadelphia Semiconductor Index, contributions were also made by technology giants, including Microsoft (MSFT.O), Amazon.com (AMZN.O), and Alphabet (GOOGL.O), to index profit.

According to LSEG data, with results from about two-thirds of S&P 500 companies, Wall Street's earnings growth expectations for the fourth quarter are now 9.0% compared to 4.7% at the start of January, with 81% of companies exceeding estimates compared to an average of 76% over the last four reporting periods.

Strong corporate earnings, positive employment data, GDP, and decreasing inflation create a favorable backdrop for further stock market development.

Consumer prices in the US for December rose less than initially expected, but core inflation remained somewhat high, as data released on Friday showed. The data revision changed little in the expectations for changes in the Federal Reserve's rates.

Inflation data for the US in January is expected next week.

The Dow Jones Industrial Average (.DJI) fell by 54.64 points, or 0.14%, to 38,671.69, the S&P 500 (.SPX) added 28.70 points, or 0.57%, to 5,026.61, and the Nasdaq Composite (.IXIC) grew by 196.95 points, or 1.25%, to 15,990.66.

Positive earnings and optimism regarding artificial intelligence helped the S&P 500 index achieve ten intra-day record highs this year.

Nasdaq closed just 0.4% below its record closing high of 16,057.44, registered in November 2021.

Over the week, all three indices recorded their fifth consecutive weekly gain: S&P rose by 1.4%, Nasdaq by 2.3%, and Dow by 0.04%.

Earlier data showed that consumer prices in the US for December rose less than initially expected, but core inflation remained somewhat high - a mixed picture that clouded expectations regarding the timing of the Federal Reserve's interest rate cuts.

Strong economic data and recent comments from Federal Reserve officials dispelled hopes that the central bank would start cutting interest rates in March.

Market participants are waiting for consumer price data for January next week to get more clues about when the Fed will reduce borrowing costs.

It's also worth noting that shares of Cloudflare (NET.N) rose by 19.5%, as optimistic revenue and profit forecasts for the first quarter were expected. However, shares of PepsiCo (PEP.O) fell by 3.6% after its fourth-quarter revenue fell short of estimates, as multiple price increases reduced demand for its juices and Lay's chips.

Shares of Pinterest (PINS.N) fell by 9.5% after the company forecasted first-quarter revenue significantly below Wall Street estimates.

The yield on benchmark 10-year US Treasury notes rose by 0.7 basis points to 4.177% from 4.17% late on Thursday.

The yield on 2-year notes, which typically moves in step with interest rate expectations, increased by 3.2 basis points to 4.4883% from 4.456%.

Gold prices were pressured by higher yields: spot gold fell by 0.44% to $2024.16 per ounce. Futures on American gold decreased by 0.4% to $2038.7.

Futures on Brent crude oil increased by 0.7% to $82.19 per barrel, while futures on American oil rose by 0.8% to $76.84.

European stocks closed slightly lower under the influence of rising yields and falling shares of L'Oreal.

The pan-European STOXX 600 index closed down by 0.1%, but still showed a weekly gain of 0.2%.

Shares of L'Oreal fell by 7.6% after the French cosmetics company reported unsatisfactory sales growth in the last quarter.

Inflation in Germany, Europe's largest economy, fell in January to 3.1%, fueling bets on when the European Central Bank will start cutting interest rates.

However, the yield on eurozone bonds reached a multi-week high after several ECB rate-setters warned against prematurely easing monetary policy.

"Indeed, it now seems entirely evident that the ECB will wait for wage statistics in Europe at the end of April before likely cutting rates in June," said ING.

Japanese stocks reached a 34-year high. The yen recovered after falling to a 10-week low as traders reassessed their bets on how quickly the Bank of Japan might raise rates.

In China, mainland markets were closed, and in Hong Kong, trading was sluggish and ended early, with the Hang Seng index falling by 0.8% amid concerns that authorities might not fulfill promises to support.

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Stocks and the dollar: stability vs. growth ahead of key consumer price index



At the start of the week, global market indices remained virtually unchanged, while the US currency slightly strengthened ahead of Tuesday's consumer price index report in the US, which could hint at when the Federal Reserve might begin cutting interest rates.

In the realm of cryptocurrencies, Bitcoin reached $50,000, a level not seen in over two years, with its value increasing by 5.6% to $50,207. Cryptocurrency stocks also saw gains: Coinbase Global (COIN.O) increased by 3.7%.

The S&P 500 index slightly fell after reaching a new intraday record high. Last week, the S&P 500 index surpassed 5,000 points for the first time in history. The MSCI global stock index remained unchanged after reaching its highest level since January 2022.

The January report on the consumer price index is expected on Tuesday, with the US producer price report to follow later in the week. Investors are also eagerly awaiting the January US retail sales report, set for release on Thursday.

Initial expectations of a Fed rate cut at the upcoming meeting were not met due to data indicating the economy remains stable.

Market estimates put the likelihood of rates staying unchanged in March at 84.5%. According to CME FedWatch Tool data, the chance of a rate cut of at least 25 basis points in May dropped to 61% from over 95% at the start of 2024.

"Moderate consumer price index data and soft retail sales should reinforce the Fed's confidence that inflation is returning to its target," said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York.

The Dow Jones Industrial Index (.DJI) rose by 125.69 points, or 0.33%, to 38,797.38, the S&P 500 (.SPX) lost 4.77 points, or 0.09%, to 5,021.84, and the Nasdaq Composite (.IXIC) dropped 48.12 points, or 0.30%, to 15,942.55.

Among the Dow Jones index components, Nike Inc (NYSE:NKE) shares increased by 2.71 points (2.59%) and closed at 107.21. Shares of Goldman Sachs Group Inc (NYSE:GS) went up by 8.63 points (2.25%), finishing at 392.89. Shares of 3M Company (NYSE:MMM) rose by 1.76 points (1.89%), closing at 94.66.

Shares of Salesforce Inc (NYSE:CRM) fell by 3.76 points (1.29%), ending the session at 287.54. Shares of Microsoft Corporation (NASDAQ:MSFT) rose by 5.29 points (1.26%), closing at 415.26, while shares of Apple Inc (NASDAQ:AAPL) dropped in price by 1.70 points (0.90%), finishing trading at 187.15.

Among the S&P 500 index components, shares of VF Corporation (NYSE:VFC) appreciated by 13.92% to 17.43, Diamondback Energy Inc (NASDAQ:FANG) gained 9.38%, closing at 165.98, and shares of Mohawk Industries Inc (NYSE:MHK) increased by 6.61%, ending the session at 117.28. Shares of Motorola Solutions Inc (NYSE:MSI) decreased in price by 3.20%, closing at 320.30.

Shares of ServiceNow Inc (NYSE:NOW) lost 3.19%, ending trading at 786.98. Quotes of Monolithic Power Systems Inc (NASDAQ:MPWR) dropped by 2.98% to 729.87.

Among the NASDAQ Composite index components, shares of Beamr Imaging Ltd (NASDAQ:BMR) surged by 371.56% to 9.95, Renalytix Ai Plc (NASDAQ:RNLX) increased by 228.00%, closing at 1.25, and shares of Millennium Group International Holdings Ltd (NASDAQ:MGIH) rose by 201.94%, ending the session at 3.11.

Shares of AN2 Therapeutics Inc (NASDAQ:ANTX) decreased in price by 74.50%, closing at 5.10. Shares of Medavail Holdings Inc (NASDAQ:MDVL) lost 43.22%, ending trading at 1.80. Quotes of TOP Financial Group Ltd (NASDAQ:TOP) dropped by 40.63% to 3.20.

Shares of Goldman Sachs Group Inc (NYSE:GS) reached a 52-week high, increasing by 2.25%, 8.63 points, and finished trading at 392.89. Shares of Beamr Imaging Ltd (NASDAQ:BMR) reached a historical high, rising by 371.56%, 7.84 points, and ended trading at 9.95. Shares of Medavail Holdings Inc (NASDAQ:MDVL) fell to a 3-year low, losing 43.22%, 1.37 points, and closed at 1.80.

The global stock index MSCI (.MIWD00000PUS), tracking stocks in 49 countries, dropped by 0.01%. European stocks (.STOXX) increased by 0.5%.

Markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia were closed for holidays.

Financial markets in mainland China were closed for the Lunar New Year holiday and will resume trading on Monday, February 19. Trading in Hong Kong will resume on February 14.

Investors also tempered their expectations for a European Central Bank rate cut after two policy makers stated last week that the ECB needs more evidence of inflation falling before it can reduce rates.

On Monday, the Federal Reserve Bank of New York published its January survey of consumer expectations, which showed that inflation expectations for one year and five years remained unchanged at 3% and 2.5%, respectively. The predicted inflation growth over three years fell to 2.4%, the lowest level since March 2020, from December's 2.6%.

The dollar index, which tracks the dollar's performance against a basket of other major trading partners' currencies, increased by 0.1% to 104.13.

The dollar rose by 0.03% against the yen to 149.35, while the euro dropped by 0.1% for the day to $1.0769.

The yield on US Treasury bonds fell, with the rates on benchmark 10-year bonds decreasing after three consecutive periods of growth.

The yield on the benchmark 10-year US Treasury bonds decreased by 1.9 basis points to 4.168% from 4.187% late on Friday.

Oil futures closed mixed, almost unchanged. Concerns over interest rates and global demand caused the market to pause after prices jumped by about 6% last week.

US oil increased by 8 cents and settled at $76.92 per barrel. Brent crude oil decreased by 19 cents and settled at $82.

Spot gold prices fell by 0.3%.

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Inflationary explosion in the US: how do the dollar and bonds react?



The consequences of high inflation are felt across the financial market. Specifically, the main Wall Street indices reacted to this news with a decrease after the publication of data indicating a higher than expected rise in consumer prices. This event pressured the expectations regarding the imminent lowering of interest rates, which in turn led to an increase in the yield of US Treasury bonds.

Among other things, the Dow Jones Industrial Average recorded its most significant drop in almost 11 months after the US Department of Labor's report showed an unexpected increase in consumer prices in January, especially due to the rise in housing costs.

Against this backdrop, market indices, which were on the rise in anticipation that the Federal Reserve System (FRS) would begin to lower rates as early as May, showed negative dynamics. The S&P 500 index, for example, closed above the 5000 point mark for the first time, and the Dow Jones index traded near record-high values. However, the publication of inflation data revised expectations regarding the FRS's policy, increasing the likelihood that rate cuts may not occur until June.

Mega-cap companies sensitive to rates, such as Microsoft, Alphabet, Amazon.com, and Meta Platforms, showed a decrease in stock prices amid the rise in yields of US Treasury bonds to a two-month high. A similar situation was observed among chip manufacturers, including Micron Technology, Qualcomm, and Broadcom, which led to a 2% drop in the Philadelphia SE Semiconductor index.

The real estate, consumer discretionary, and utilities sectors faced the most significant losses among the 11 major industry indices of the S&P 500, especially real estate, which reached its lowest values in more than two months.

Small-cap companies also felt the pressure, with the Russell 2000 index showing the most significant daily drop since June 2022.

"Various statements by Federal Reserve System officials in recent weeks have indicated that the market-anticipated rate cuts in the first half of the year might have been premature. The latest consumer price index data certainly confirms this trend," commented Bob Elliott from Unlimited Funds.

The consumer inflation data followed a modest revision of inflation figures for the last quarter of 2023, giving investors temporary relief regarding inflation expectations.

The Cboe Volatility Index reached its highest level since November, highlighting the growing market concern. The S&P 500 and Nasdaq Composite indices lost 1.37% and 1.79% respectively, while the Dow Jones Industrial Average fell by 1.36%, marking its most significant decline since March 2023.

Among other developments, JetBlue Airways shares surged by 21.6% after Carl Icahn disclosed his stake in the company, calling the shares "undervalued." Arista Networks' shares declined by 5.5% following a gross profit forecast below expectations, and Marriott International lost value after forecasting annual earnings below analyst expectations.

Cadence Design Systems and toy manufacturer Hasbro also faced a drop in share value after publishing gloomy forecasts. Meanwhile, Tripadvisor shares jumped by 13.8% following the announcement of the creation of a special committee to review deal proposals.

The total trading volume on US exchanges reached 12.9 billion shares, comparable to the average of the last 20 sessions at 11.71 billion shares.

The US stock market continues to demonstrate record levels, supported by leading technology companies and expectations of Federal Reserve rate cuts. The global stock index MSCI and the Stoxx 600 European index also showed a decline amid current events.

The dollar index reached a three-month high, and bitcoin set a new record since December 2021, despite subsequent declines.

Data on US retail sales and the producer price report are expected shortly, which may further influence market sentiments.

The rise in oil prices continues amid tensions in the Middle East and Eastern Europe, with Brent crude futures and West Texas Intermediate showing significant increases. Meanwhile, gold prices fell below the key level of $2000 per ounce after the CPI data was released, reaching a two-month low.

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Intraday Price Movement of Litecoin Cryptocurrency, Friday February 16 2024

If we look at the 4-hour chart of the Litecoin cryptocurrency, we can see a Bearish 123 pattern followed by the apperance of a Bearish Ross Hook (RH) pattern and a Rising Wedge pattern, all of which confirms that in the near future Litecoin has the potential to weaken down to level 68.16. If this level is successfully broken downwards then Litecoin will have the potential to continue weakening to level 66.45, but if on its way down there suddenly occurs an upward correction which breaks above level 72.93 then all the decline scenarios that have been described previously will automatically cancel themselves.

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Gold and oil raise rates

In Asian markets on Tuesday, gold prices remained within a narrow range amid fears of long-term interest rate hikes. The absence of trading signals was also due to a holiday in the American market.

Gold demonstrated some strengthening, reaching the $2000 per ounce mark after recovering from a two-month low over the last two trading sessions. However, current fluctuations in gold prices are still occurring within the range of $2,000-$2,050, which was established for the majority of 2024.

Spot gold prices increased slightly by 0.1% to $2,019.17 per ounce, while the price of gold futures expiring in April settled at $2,030.20 per ounce as of 23:34 Eastern Time.

Analysts from Citibank highlight three main catalysts that could push gold prices to $3000 per ounce and oil to $100 per barrel in the next 12-18 months. Among them are a sharp increase in gold purchases by central banks, stagflation, and a deep global recession. Currently, gold is trading around the $2016 mark and could rise by approximately 50% in the event of any of these scenarios materializing.

Analysts point to dedollarization in central banks of developing countries as the most likely path to reaching $3000 per ounce of gold. This would lead to a doubling of gold purchases by central banks and shift the focus of demand from jewelry to gold as the main driver. Central bank gold purchases have reached record levels in recent years, aiming to diversify their reserves and reduce credit risk. Leading this trend are the central banks of China and Russia, as well as India, Turkey, and Brazil, actively increasing their gold bullion purchases. According to the World Gold Council, global central banks have maintained a level of net gold purchases exceeding 1000 tons for two consecutive years.

In the context of a global recession, a deep economic downturn could force the United States Federal Reserve to drastically cut rates, which, in turn, could be the reason for gold prices to rise to $3000. Gold traditionally exhibits an inverse correlation with interest rates, becoming a more attractive asset compared to fixed income in a low-rate environment.

Stagflation, combining high inflation with economic slowdown and rising unemployment, could also trigger a rise in gold prices, despite the low likelihood of such a scenario. Gold is perceived as a safe haven in periods of economic instability, attracting investors looking to avoid risks. In addition to the above factors, Citi suggests that the baseline scenario for gold involves reaching a price of $2150 per ounce in the second half of 2024, with an expected average price just over $2000 per ounce in the first half of the year. Record prices may be achieved by the end of 2024.

Although geopolitical tensions in the Middle East provide support for gold prices, a more significant price increase is restrained by the prospect of long-term interest rate hikes in the US.

Traders are lowering expectations regarding the Federal Reserve's imminent rate cuts following reports of high inflation in the US, and statements from Fed officials reinforce assumptions about maintaining high interest rates over a longer period.

The outlook for gold in the near future remains uncertain, similar to the situation in the market for other precious metals. Prices for platinum and silver show a decline, and copper experiences a slight drop in price, despite a reduction in the base interest rate in China, the largest importer of the metal.

In the context of the oil market, analysts consider a scenario where oil prices could once again reach $100 per barrel, considering risks associated with geopolitical tensions, actions by OPEC+, and possible supply disruptions from key oil-producing regions. Tensions in the Middle East, particularly the conflict between Israel and Hamas, and increasing tension on the border between Israel and Lebanon highlight potential risks for oil suppliers in the OPEC+ region.

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Nikkei Hits New Highs: How Nvidia Became the Driving Force Behind the Semiconductor Industry's Growth



A landmark milestone was recorded in the Japanese stock market on Thursday: the Nikkei average breached the threshold set in December 1989, thanks to a significant rise in the share prices of companies operating in the microelectronics sector. This leap was driven by the superior earnings forecasts of American chip giant Nvidia, surpassing market expectations.

The Nikkei index reached 39,029.00, updating the historical high of 38,957.44 set on the last trading day of 1989, when the Japanese economy was at the peak of the "bubble." This was made possible by low asset valuations and corporate reforms, which attracted the attention of foreign investors looking for alternatives to weakening Chinese markets. Since January 2023, the index has jumped by 52%, showing impressive growth.

It took 34 years to recover from the downturn, a record period for a major market, surpassing Wall Street's recovery from the Great Depression by ten years.

To date, the index has shown a growth of almost 17% after a 28% increase in 2023, leading among major Asian exchanges. While the Nasdaq technology index grew by 43% last year and by 6% this year.

The Nikkei rally successfully resists recession in Japan, military conflicts in Europe and the Middle East, global inflationary pressure, and rising interest rates worldwide. Trading activity and a weak national currency contributed to increased exporter revenues, protecting the market from a decline in domestic demand.

The implementation of corporate reforms in Japan, including share buybacks and reduction of cross-shareholdings, as well as foreign investments such as Warren Buffet's significant investments in 2020, highlighted the attractiveness of valuations and contributed to the rally. Last year, the Japanese stock market received 6.3 trillion yen ($42 billion) in foreign investments, and in January of this year, 1.16 trillion yen.

The success of the Japanese market at the beginning of 2024 was also due to a strong earnings season, a drop in the yen's value, and expectations that the Bank of Japan will continue its ultra-loose monetary policy. Analysts raised their year-end forecasts from 35,000 to 39,000, noting the potential for further growth.

Comparing the current market situation to the boom of the 1980s and the subsequent crash, which led to a prolonged period of deflation, there is no fear of a new crisis today, as inflation is controlled at just over 2%, and company incomes continue to grow.

Companies like Fast Retailing Co (owner of Uniqlo), chipmakers Advantest Corp and Tokyo Electron have become the backbone of the current rally, unlike past decades when bank and real estate stocks were in focus.

The growth of the Japanese market is also supported by robust corporate reforms and opportune timing for growth amidst a downturn in China. While the Nikkei index is on the rise, indexes in Hong Kong and China are experiencing a downturn, attracting investments to Japan.

Corporate cash reserves and household savings in Japan also have the potential to stimulate stock price growth, encouraging their entry into the market.

A 6% increase in Nvidia shares after a revenue forecast exceeding expectations highlighted the company's steady demand for chips, becoming a key factor for the market. Shares of Tokyo Electron and Advantest, along with other companies in the microelectronics sector, showed significant growth, contributing to the overall success of the Nikkei index and demonstrating a healthy dynamic in the industry.

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THE MARATHON CONTINUES: S&P AND DOW SET NEW RECORDS, NVIDIA STOCK KEEPS UP ITS MOMENTUM



According to the FedWatch Tool by CME Group, Fed funds futures show a 52.6% probability of rate cuts in June and a 35.5% probability of keeping them at current levels, which is a sharp change compared to the probability of cuts in March, which stood at 62%.

The pan-European STOXX 600 index (.STOXX) rose by 0.43%, continuing its fifth consecutive week of gains and reaching a new record closing level. The French CAC40 index (.FCHI) and the German DAX index (.GDAXI) also closed at new record levels. The dollar is poised for its biggest weekly decline in 2024 as investors slow their pace and await further cues regarding the global economy.

The dollar index increased by 0.029%, while the euro decreased by 0.03% to $1.082.

Regarding European data, sentiment among German businesses in the largest economy in Europe unexpectedly declined in December, according to a survey by the Ifo Institute.

Yields on German bonds continue to rise for the third consecutive week as economic data and statements from central bank officials undermine investors' hopes for a swift interest rate cut by the European Central Bank this year.

The Japanese stock market was closed due to a holiday on Friday, but Nikkei futures rose by almost 1%, suggesting that Japanese stocks will continue their record growth next week.

Chinese stocks fluctuate between gains and losses. The Shanghai Composite index (.SSEC) rose above the key psychological level of 3,000 points. For the week, it rose by 4.6%, climbing approximately 10% from a five-year low set over two weeks ago.

The Hang Seng index (.HSI) in Hong Kong fell by 0.1%.

Data released on Friday showed that new home prices in China declined in January for the seventh consecutive month, causing instability in sentiment as policymakers' efforts to restore trust in the debt-laden sector are slowly progressing.

The yield on two-year Treasury bonds, reflecting expectations regarding interest rates, fell by 2.2 basis points to 4.692%, while the yield on benchmark 10-year bonds decreased by 7.5 basis points to 4.252%.

10-year bond yields reached a three-month high at 4.3540% overnight. Futures for US crude oil fell by $2.12 to $76.49 per barrel, while Brent crude oil prices dropped by $2.05 to $81.62 per barrel. Gold prices are poised for a weekly gain, thanks to the weakening dollar. Futures for US gold rose by 0.9% to $2049.40 per ounce.

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EUR/USD OUTLOOK: DOLLAR MAY FALL INTO BULLISH TRAP

Today's focus is on crucial economic indicators and events that could significantly impact the financial markets. The spotlight is on the US GDP data for the fourth quarter, providing insights into the country's economic performance. Additionally, preliminary statistics on the trade balance for goods and speeches by influential Fed representatives - Bostic, Collins, and Williams - are on the agenda. In the Eurozone, the economic sentiment index for February has been released, offering a comprehensive view of the current economic climate in the region. Looking ahead to the end of February, a meeting of finance ministers and central bank governors from G20 countries is scheduled for the 28th and 29th. This gathering will bring together global financial leaders to discuss key economic issues that could impact financial markets. On Thursday, attention will shift to the core US Personal Consumption Expenditures (PCE) price index, a pivotal measure for assessing inflation. Traders will carefully analyze this data to formulate potential trading strategies as the dollar index fluctuates. In Wednesday's trading, the dollar index regained control at 104.0, despite weak industrial orders data in the United States. Traders are eagerly anticipating new information on inflation, which could hint at the Federal Reserve's possible timeline for interest rate adjustments. The unexpected drop in US consumer confidence to 106.7 points in February, contrary to the expected rise to 115.0, has limited the dollar's strengthening. Additionally, statistics reveal a record monthly decline in new orders for durable goods in January, down 6.1% from December, surpassing analysts' expectations of a 4.5% decline. Bloomberg economists have revised their forecast for US economic growth in 2024 to 2.1%, reducing the likelihood of a recession to 40%. The US economic growth rate, updated on Wednesday, showed a year-on-year increase of 3.2% in the fourth quarter, slightly lower than the 3.3% advance estimate, with the downward revision attributed to rising private sector inventories. The dollar retreated from its intraday high following mixed second US GDP data, emphasizing the market's sensitivity to economic indicators and the potential impact on currency valuations. Technical outlook The dollar index surged, catching some bearish investors off guard. Despite this, the path to a substantial recovery appears challenging, given the hurdles posed by the latest US GDP data and its components. The Federal Reserve, led by Jerome Powell, has consistently emphasized its reliance on economic data. Presently, the data suggests a potential need for further rate hikes, a development conflicting with market expectations. This discrepancy may cool sentiment as the Fed evaluates the extent of potential disappointment. Examining the technical landscape, the 100-day simple moving average (SMA) near 104.00 has been tested, with its resistance being overcome. However, there is a looming risk of a bull trap formation. A breakthrough at 104.60 for the USD would pave the way to the next significant resistance levels at 105.12, followed by 105.88. Looking ahead, a shift in market expectations for a delayed Fed rate cut until late 2024 could bring the 2023 high at 107.20 back into relevance. In the face of sustained selling pressure, support may weaken, potentially leading to further declines to 103.16, marked by the 55-day SMA, before testing the crucial level of 103.00. Monitoring these technical and fundamental factors is essential for a comprehensive assessment of the dollar's trajectory in the current market environment.

In recent developments, it's notable that negotiations in the US Congress aimed at preventing a government shutdown and providing assistance to Ukraine, Israel, and Taiwan did not yield an agreement between Republicans and Democrats. The potential for a government shutdown looms, which could trigger a decline in risk asset markets while bolstering the position of the dollar. Market sentiment is also influenced by the anticipated likelihood of a 25 basis point Fed rate cut to 3% at the March meeting, with a 21% chance of a similar decision at the April-May meeting. On the international front, Germany, France, and Spain are set to report inflation data on Thursday, preceding eurozone statistics scheduled for Friday. ECB officials remain cautious about rapidly easing monetary policy in the eurozone. Christine Lagarde highlighted stable wage growth in the region, and Yiannis Stournaras from the ECB's executive board ruled out interest rate cuts before June. In Germany, the GfK consumer sentiment index continues to show negative readings, reaching -29.0 in February compared to -29.6 in January. German citizens persist in viewing cost-saving as a prudent strategy in the face of rising prices and more pessimistic forecasts for the national economy this year. Furthermore, lending to households in the eurozone recorded a mere 0.3% year-on-year growth in January, marking the slowest pace since March 2015. This underscores a notable deceleration in economic activity in the eurozone amid ECB rate hikes. Monitoring these diverse factors provides a comprehensive understanding of the dynamic forces shaping the current economic landscape. Euro's weakness The EUR/USD pair declined to the psychological level of 1.0800 amid the dollar's uptrend and deterioration of the consumer sentiment in the euro zone. These signals indicate that the euro's recovery cycle may be completed.

The preceding day saw the currency pair reaching its peak at 1.0866, only to experience a subsequent decline to 1.0813, triggered by a dip in the European Commission's Economic Sentiment Index (ESI) for February to -9.5. This was against the forecast of -9.2 and the previous value of -9.3. The eurozone economy continues to grapple with challenges, and the decrease in economic sentiment indicators suggests that risks lean towards further deterioration in the short term. Although the euro has exhibited growth against the dollar since mid-February, primarily driven by the dollar's weakening due to early-year economic slowdown, the latest sentiment data emphasizes the challenging economic environment in the eurozone. This points to ongoing difficulties that may constrain the euro's potential for recovery. There is speculation that the ECB might opt for an interest rate cut earlier than June, which could limit the euro's growth prospects. Scotiabank observes a weakening of the euro around the 1.0850 mark, reinforcing bearish sentiment on short-term charts. A rebound above the 1.0835 resistance level could alleviate pressure on the euro, potentially guiding it towards higher ground around 1.0800. As the month concludes, additional pressure on the dollar is anticipated, confirming the technical nature of the recent dollar weakening rather than a shift in the fundamental trend, according to experts. Despite recent fluctuations, the prevailing trend suggests the dollar's upward trajectory. The dollar's downward trend is expected to be short-lived, considering the outperformance of the US economy and bond yields near three-month highs, which make the greenback appealing. Moreover, the Federal Reserve is not likely to implement interest rate cuts anytime soon, especially given the more accommodative policies pursued by other major central banks globally. Stronger-than-expected data from the US and the cautious stance of Fed officials against premature policy easing contribute to the likelihood of a revision in market expectations, potentially leading to further gains for the dollar following the ongoing consolidation period.

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AHEAD OF THE STORM: DOLLAR GAINS STRENGTH, STOCKS LOSE GROUND ON US INFLATION



According to the latest data, economic growth in the United States for the fourth quarter of last year was revised slightly downwards, suggesting a possible weakening of economic momentum. This downturn could have long-term implications for overall economic stability and may influence policymakers' decisions regarding monetary policy.

During this period, Applied Materials, a leading supplier of equipment for semiconductor production, faced a decline in its stock value after receiving a subpoena from the Securities and Exchange Commission (SEC) of the USA. This highlights increased regulatory pressure on the technology sector, which could restrain investment potential and growth in this area.

Also noteworthy is the drop in shares of UnitedHealth, one of the largest providers of healthcare services in the U.S., following the announcement of an antitrust investigation. This event underscores growing concerns about market power concentration and its impact on consumers and pricing in key economic sectors.

Stock indices such as the Dow, S&P 500, and Nasdaq showed a decline, reflecting overall investor caution. This caution is intensified in anticipation of the release of key inflation data, which could significantly affect the future actions of the U.S. Federal Reserve System in regulating interest rates.

The Personal Consumption Expenditures (PCE) index, which is the preferred inflation indicator for the Federal Reserve, is expected to show an increase in prices, confirming the continuation of inflationary pressure in the economy. This, in turn, could lead to a reassessment of expectations regarding the pace and timing of changes in the Fed's key interest rate.

Stocks in the market have struggled to maintain an upward trend following a series of data publications, leading to a moderate decline after a prolonged period of growth based on optimism around the potential of artificial intelligence and outstanding quarterly performance by Nvidia. This period of growth was abruptly interrupted when data confirming the persistence of inflation began to emerge, causing investor concern and leading to a reassessment of their expectations regarding the future monetary policy of the Federal Reserve System.

Evidence of sustained inflation in recent reports on consumer and producer prices, along with statements from Federal Reserve officials, has led investors to contemplate the possibility of delaying the first rate cut to a later date, possibly until June instead of the previously expected March.

Keith Buchanan, a senior portfolio manager at GLOBALT Investments, expressed the opinion that the market may face a period of uncertainty as investors will need to closely monitor inflation trends and adjust to the Federal Reserve System's long-term policy and rhetoric. He emphasized that any signs of inflation resurgence would be met with particular caution by the market and could cause significant fluctuations in financial markets.

Against this backdrop, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite demonstrated a decline, reflecting the general sentiment of uncertainty among investors. These data indicate that despite confident growth in the previous quarter, the beginning of 2024 may be marked by a slowdown in economic activity.

In addition to PCE data, this week is also expected to see other important economic reports, including weekly data on unemployment claims and manufacturing activity indices. These reports will provide a more complete picture of the economy's state and help assess further interest rate dynamics.

Statements by the president of the Federal Reserve Bank of Boston, Susan Collins, and the president of the Federal Reserve Bank of New York, John Williams, indicate the Federal Reserve System's cautious approach to changing monetary policy. Both leaders highlighted the importance of careful analysis of economic data before making decisions that could affect the goals of maximum employment and price stability.

In summary, global stocks have shown a decline, the yield on treasury bonds has fallen, and the dollar has strengthened its positions ahead of the publication of key inflation data, which could significantly impact the future policy of the Federal Reserve System. These events highlight the complexity of the economic landscape and the importance of careful monitoring by investors and policymakers to adapt to changing conditions.

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