Markets Mark Time Ahead of Big Data Week

For the week ending 1 March 2024

As of midday Friday, global equities were flat on the week, with markets looking ahead to important economic events next week such as updated purchasing managers’ indices, the US employment report and an ECB meeting. The yield on the benchmark US 10-year Treasury note fell to 4.23% from 4.31% a week ago while the price of a barrel of West Texas Intermediate crude oil rose $3 to $79.80. Volatility, as measured by the Cboe Volatility Index (VIX), edged down to 13.3 from 14. 

MACRO NEWS

US core PCE matches expectations

The US core personal consumption expenditures price index, the US Federal Reserve’s preferred inflation measure, rose 0.4% month over month in January, in line with market expectations. Heading into the data, investors feared an upside surprise. Inflation hawks noted that the “supercore” measure (core services ex housing) rose 0.6% on the month, a figure that could keep the Fed on the monetary sidelines, maintaining higher rates for longer. 

US Q4 GDP little changed

Gross domestic product in the United States was revised to 3.2%, 0.1% lower than the initial reading a month ago. However, the personal consumption component was revised higher while inventories were marked lower, suggesting the economy retains solid momentum. The Federal Reserve Bank of Atlanta’s GDPNow indicators projects the economy will grow 3.25% in Q1. 

Macron floats idea of NATO troops in Ukraine, Putin threatens nukes

French President Emmanuel Macron said this week that he would not rule out sending NATO troops to join the fighting in Ukraine. Allies, including the US, were quick to puncture the French leader’s trial balloon. German Chancellor Olaf Scholz said no European or NATO troops would actively take part in the war. On Thursday, Russian President Vladimir Putin, in an annual speech to Russia’s parliament, warned the western allies that intervening in the war in Ukraine could lead to the use of nuclear weapons. 

China revises state secrets law

China has expanded its state secrets law so as to encompass additional information it deems sensitive. The revision has increased the concerns of foreign businesses operating in China, adding to the risks of doing business in the country, further dampening confidence. 

QUICK HITS

The Institute for Supply Management’s February US manufacturing index fell well short of expectations on Friday, slipping to 47.8 from 49.1 the month before. Economists had expected a rise to 49.5. The new orders subcomponent fell to 49.2 from 52.5 in January. 

The US Congress passed another stopgap government funding measure on Thursday, averting a partial government shutdown. Lawmakers aim to complete the appropriations process for the balance of the fiscal year by 22 March. 

India’s economy continued to grow rapidly in Q4, climbing a more-than-expected 8.4%. Growth in the third quarter was revised to 8.1% from an initial 7.6% reading. 

Creditors of Chinese property giant Country Gardens have filed a petition in Hong Kong to liquidate the development company over delinquent loans. 

US Senate Minority Leader Mitch McConnell (R-KY) announced that he will step down from his leadership post after the November elections but will remain in the Senate until the end of his term in early 2027.  

US new home sales rose a lower-than-expected 1.5% in January to a 661,000 annual pace. Pending home sales fell 6.8% from a year earlier in January. Despite slumping sales, the S&P CoreLogic national home price index rose 5.5% year over year in December. 

Hungary voted this week to allow Sweden to join NATO, clearing the way for Sweden to enter the alliance. 

Japan’s demographic woes deepened in 2023 as births fell for an eight straight year, this time going down to a record-low 759,000, a drop of 5.1% from a year earlier. The number of deaths, at 1,591,000, was more than double the number of births while the number of marriages fell to a post–World War II low. 

Canada’s economy grew at a 1% annual pace in Q4. 

Swiss National Bank Chair Thomas Jordan will step down at the end of September after more than a decade in his role. 

Gains in small-cap stocks outstripped gains in larger ones in February as the Russell 2000® rose 5.5% on the month, besting the S&P 500 Index’s 5.2% advance. 

Inflation in the eurozone moderated less than expected in January, falling to 2.6% from 2.8% at the headline level but holding above the 2.5% rate expected. Core inflation declined to 3.1% from 3.3%, above expectations of a drop to 2.9%. The prices of goods grew more slowly than the prices of services, though disinflation was broad based. 

Shipments of semiconductors helped lift South Korean exports for a fifth straight month in January. 

Last month, US corporate bond issuance hit $197 billion, a February record.

Japan core CPI rose 2% in January, down from 2.3% in December but above the 1.8% consensus forecast.

European Central Bank President Christine Lagarde said “we’re not there yet” on inflation and that the ECB wants prices to fall sustainably to 2%. The European economy should pick up later this year, she said, noting increasing signs that economic weakness is bottoming out. 

The finance ministers of the G20 countries failed to agree on the substance of a communiqué as they wrapped up a meeting in Brazil on Thursday amid disagreements over the framing of regional conflicts in Ukraine and Gaza. However, an early draft said the G20 sees a growing chance of a global soft landing and made note of faster-than-expected disinflation.  

Bloomberg reported Friday morning that Germany is preparing a tax package worth €7 billion to spur economic growth, which has been sluggish.