Thursday Morning Coffee - Markets Update

29 Feb 2024

The Trade Academy Team

08:00 CET - 3 min read

Thursday Morning Coffee - Markets Update - 29 Feb 2024 - Global Markets Brace for U.S. Inflation Data as Asian Equities Face Mixed Fortunes

Markets Update: The market's anticipation and focus on this key economic indicator underscored the significance of the impending data release in shaping broader market sentiments and investment strategies.

ECONOMIC CALENDAR

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Global Markets Roundup: 29 Feb 2024

Asian equities displayed a predominantly weaker trend, while the dollar and U.S. Treasuries maintained stability in anticipation of crucial U.S. inflation data. The impending release is expected to offer fresh insights into the potential timeline for the Federal Reserve's interest rate adjustments. In contrast, Chinese stocks rebounded from the previous day's sharp decline, positioning themselves for the best monthly performance since November 2022. The Japanese yen strengthened following remarks from a Bank of Japan official, hinting at a possible exit from ultra-easy monetary stimulus.

Bitcoin experienced fluctuations around $61,400, following a remarkable three-day surge that propelled it to over $63,933, marking its highest level in over two years. Wall Street futures hinted at marginal declines, mirroring the overnight downturn in all three major indexes. S&P 500 futures and Nasdaq futures were down by 0.04% and 0.06%, respectively.

Japan's Nikkei share average slipped 0.45%, retracing slightly from the record peak achieved on Tuesday. South Korea's Kospi declined by 0.54%, while Taiwan and Australia benchmarks remained flat. European equity futures point towards a stable market opening, as Euro Stoxx 50 futures remain unchanged following a flat closure of the cash market on Wednesday.

Mainland Chinese blue chips, however, saw a positive upswing of 0.82%, recovering from the previous session's 1.27% decline. This month has witnessed state-led buying and tightened regulations lifting the index from five-year lows, but sustained momentum hinges on the realization of more aggressive stimulus amid economic challenges. Hong Kong's Hang Seng added 0.44%, contributing to MSCI's broadest index of Asia-Pacific shares outside Japan, which edged 0.06% higher.

Forex

The U.S. dollar index, measuring the currency against major peers, slipped 0.06% to 103.86, largely influenced by a dip against the yen. The yen gained ground after a Bank of Japan official advocated for "nimble and flexible responses," including reconsidering policies such as negative interest rates and yield curve control. In the currency market, the dollar dropped 0.52% against the yen, breaching the closely watched 150 line for the first time in over a week. The euro remained little changed at $1.0834, while sterling was flat at $1.26635. U.S. 10-year Treasury yields held steady around 4.28%. Bitcoin maintained its upward trajectory, standing 1.5% higher at $61,477, after reaching close to $64,000 overnight, marking its highest level since November 2021. In February 2024, the Japanese yen (USDJPY) and the Swiss franc, both considered safe-haven currencies, have experienced notable depreciation against the US dollar. This decline can be attributed to a shift in investor sentiment towards riskier assets and a recalibration of expectations regarding potential US interest rate cuts, which has bolstered the strength of the dollar.

The yen, closing the month at 149.87 against the dollar, has registered a decline of approximately 2%. However, a noteworthy development occurred when Bank of Japan board member Hajime Takata expressed optimism about achieving the bank's 2% inflation target. Takata's remarks, suggesting a departure from negative rates and yield caps, contributed to a 0.6% uptick in the yen for the day. Against the euro, the yen has experienced a decline exceeding 2% this month and reached a nine-year low against the Australian and New Zealand dollars. Meanwhile, the euro (EURUSD) remained stable at $1.0835, maintaining a relatively flat performance throughout the month. Similarly, the British pound (GBPUSD) held steady at $1.2665. The Australian and New Zealand dollars, however, experienced declines in February as market expectations solidified that interest rate hikes in these regions have concluded. Specifically, the New Zealand dollar (NZDUSD) faced losses at $0.6105, declining by 1.2% against the dollar following the central bank's decision to maintain rates and revise its forecast downward, surprising the markets. The Australian dollar saw a marginal increase of 0.3% to $0.6516 on Thursday but recorded an overall monthly drop of 0.8%.

COMMODITIES

In the commodities market, oil prices eased on the back of a larger-than-expected build in U.S. crude stockpiles, raising concerns about sluggish demand. Additionally, indications of prolonged elevated U.S. interest rates added pressure, with Brent crude futures falling 0.3% to $83.46 a barrel, and U.S. West Texas Intermediate crude futures down 0.4% to $78.24 a barrel. Three-month nickel on the London Metal Exchange NICKEL1! rose 0.3% to $17,650 per metric ton by 0632 GMT, and has gained 8.5% so far on a monthly basis. Gold exhibited stability, hovering at approximately $2,035 per ounce. This steady trend persisted throughout the week, with investors closely monitoring a pivotal U.S. inflation report that holds the potential to influence the future trajectory of interest rates.

COFFEE

May arabica coffee on Wednesday closed down -1.30 (-0.71%), and May ICE robusta coffee closed down -33 (-1.07%).

COCOA

* May London cocoa C2! settled down 363 pounds, or 6.6%, at 5,134 pounds per metric ton after setting a record high of 5,605 pounds on Monday.

* May New York cocoa CC2! fell 7.1% to $5,994 a ton.

Looking ahead: