Global Markets Roundup: 22 Feb 2024

NVIDIA's robust revenue projections appeared to cast a spell on the AI sector, particularly evident in Japan. The Nikkei NI225, initially exhibiting early apprehensions, ultimately surged by an impressive 2%, reaching a historic high above 39,000. This milestone marked the end of a 34-year hiatus from its previous peak during the "bubble" era. Conversely, Chinese stocks, represented by HSI (Hang Seng Index), encountered challenges with a 7-day winning streak showing signs of fatigue, likely influenced by a waning effect of Beijing's stimulus measures. Notably, the Hang Seng tech shares subindex HHSTECH spent the day in the red, indicating a potential slowdown in the sector. Chinese hedge funds have been working diligently to restore investor confidence following the recent dip in shares, which reached five-year lows at the beginning of the month. The impact of NVIDIA's success on Wall Street is undeniable, as Nasdaq futures NQ1! point towards a 1.5% increase, following a lackluster day of trading on Wednesday.

In Europe Euro Stoxx 50 Index expected to open higher +0.3%, while traders are anticipating a slew of macro indicators, including PMIs from Germany, France, and the eurozone, along with final consumer inflation readings for January in the euro area. The euro (EURUSD) and sterling (GBPUSD) have outperformed the dollar (DXY) and yen (USDJPY) over the past week, driven by expectations that the ECB and Bank of England will be more measured in rate cuts compared to the Federal Reserve, while the Bank of Japan maintains a cautious approach to rate hikes. The 10-year Treasury yield (US10Y) remains elevated above 4.3%, just below the 4.4% threshold identified by some analysts as the point where equity market concerns may intensify.

FX

The Dollar Index DXY exhibited a restrained performance, hovering around the 104 mark. This subdued movement followed the release of the minutes from the latest Federal Reserve policy meeting, revealing a notable apprehension among policymakers regarding the prospect of prematurely reducing interest rates. This signals a departure from market expectations, indicating that any imminent policy easing is unlikely. Traders, in response to this new information, have largely abandoned anticipations for a rate reduction in both March and May. However, the prevailing sentiment continues to suggest a possibility of such an adjustment in June. The probability of a 25 basis point cut in June is currently estimated at approximately 53%. This nuanced market outlook underscores the cautious stance taken by both traders and policymakers in navigating the evolving economic landscape. USD/JPY experienced a 0.13% increase, driven by the relatively stagnant Japanese Government Bond (JGB) yields, rendering the yen susceptible to higher-yielding currencies. China's proactive measures to stabilize its stock and property markets had a discernible impact on the USD/CNY pair, contributing to a 1.35% gain in the CSI300. This resurgence brought the index back up to the panic lows observed in 2022. The recovery of the EUR/USD pair from its February lows was facilitated by a 5 basis points tightening of the 2-year bund-Treasury yield spreads. However, these gains encountered resistance from the declining 30-day Moving Average (MA), which stood at 1.0829 in the latest assessment. Despite the boost from yield spreads, the EUR/USD's upward momentum appears to be constrained by the prevailing downtrend indicated by the 30-day MA.

COMMODITIES

Global oil prices experienced a second consecutive day of increase, driven by optimistic expectations of heightened demand in the United States—the largest consumer of oil worldwide. This surge is attributed to the ongoing efforts of refineries to resume operations following recent outages, coupled with the depreciation of the dollar. Brent crude futures, symbolized by BRN1!, witnessed a 0.2% uptick, corresponding to a 17-cent rise, reaching $83.20 per barrel as of 05:10 GMT. Simultaneously, U.S. West Texas Intermediate crude futures for April, represented by CL1!, saw a similar 0.2% increase, translating to a 19-cent climb and settling at $78.10 per barrel. Notably, Wednesday also witnessed a 1% upswing in oil prices, reflecting the market's responsiveness to prevailing factors.

Gold prices experienced a marginal uptick, influenced by a decline in the value of the U.S. dollar and growing geopolitical tensions in the Middle East. This increase comes amidst heightened anticipation among investors for forthcoming U.S. economic data, which could provide insights into the Federal Reserve's stance on interest rates. As of 0328 GMT, the spot gold market exhibited a 0.1% rise, reaching $2,026.7 per ounce—a notable climb since its peak on February 9. Simultaneously, U.S. gold futures saw a modest 0.1% increase, settling at $2,036.9 per ounce. These developments underscore the interplay between global economic factors and geopolitical events, shaping the trajectory of precious metal prices in the current market landscape.

Copper futures experienced an upward surge, surpassing the $3.85 per pound mark. This notable increase, reaching its highest point in three weeks, can be attributed to a combination of factors. A weakened US dollar played a pivotal role in this upswing, amplifying the appeal of commodities like copper to investors. Additionally, optimism surrounding economic stimulus measures in China contributed to the positive momentum, fueling expectations of heightened industrial activity and increased demand for essential raw materials.

The arabica coffee futures for May (KCK24) exhibited a positive performance, closing with a gain of +1.85 (+0.99%). Simultaneously, the March ICE robusta coffee futures (RMH24) concluded with an increase of +4 (+0.12%). The uptrend in coffee prices was notable on Wednesday. The surge in arabica coffee prices was attributed to traders transitioning from the expiring March contract to the upcoming May arabica coffee contract. This shift was particularly significant as it coincided with the first notice day for March arabica futures, prompting market participants to reposition their investments accordingly.

London cocoa futures (C2!) exhibited a noteworthy surge, experiencing a 5.2% increase to reach 4,976 pounds per metric ton. This ascent was particularly notable as it culminated in the establishment of a new record high, peaking at 4,997 pounds. Market analysts and dealers attributed this upward trajectory to prevailing weather conditions in Ivory Coast, where hot and dry weather was observed.

Chicago corn futures experienced a notable decline, reaching their lowest point since November 2020. This downward trend was attributed to speculators anticipating a further reduction in prices, driven by an abundant supply from key exporters, namely the United States and Brazil. Simultaneously, soybean prices remained close to a three-year low, a situation exacerbated by the influence of competitively priced Brazilian exports. Additionally, the wheat market saw a decrease, primarily due to the substantial volume of shipments from Russia. The leading corn contract on the Chicago Board of Trade (CBOT), represented by ZC1!, exhibited a 0.4% decline, settling at $4.22-1/2 per bushel as of 0637 GMT. The contract had briefly touched $4.08-3/4, underscoring the prevailing bearish sentiment in the market.

The Wheat futures market displayed a slight softening characterized by a modest retracement. Chicago Soft Red Winter (SRW) futures experienced a downturn of up to 2 cents, a movement insufficient to entirely counter Tuesday's notable rally. As of the close of Wednesday's trading, March SRW futures retained a net gain of 19 cents for the week. Meanwhile, Kansas City (KC) futures observed a decline ranging from 4 to 8 ½ cents. Additionally, Spring wheat futures in Minneapolis concluded the session with losses ranging from 3 ¾ to 6 ¼ cents. This nuanced market behavior underscores the dynamic nature of commodity trading, with participants navigating fluctuations to discern underlying trends and make informed decisions.

Key market-influencing developments on Thursday include flash PMIs for Germany, France, the eurozone, and the UK (all for February), final HICP for the eurozone (January), and crucial earnings reports from Nestle, Lloyds, and Anglo American. Additionally, market participants will be closely monitoring US initial jobless claims, flash PMIs for February, and existing home sales data for January.

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General news - Information source from multiple newswires.

The article and the data is for general information use only, not advice!

The Trade Academy Team

Rating: Mixed Outlook

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