Global Markets Roundup: 28 Feb 2024

Global financial markets adopted a cautious stance on Wednesday as investors anticipated key economic indicators, with a particular focus on the upcoming U.S. inflation reading later in the week. This data holds potential significance in influencing the Federal Reserve's decisions regarding adjustments to its easing cycle.

In the Asia-Pacific region, shares, excluding Japan, displayed a marginal decline of 0.44% to reach 525.40 points on Wednesday. Despite this minor setback, the market remains in proximity to a nearly seven-month pinnacle of 531.56, following a robust rally. Remarkably, the index has demonstrated a remarkable ascent of 4.4% over the course of the month, marking its most robust February performance in over a decade. In Japan the benchmark Nikkei average NI225 closed down 0.08% at 39,208.03 on Wednesday, while the broader Topix TOPIX shed 0.16% at 2,674.19. Anticipating Wednesday's trading trends in Europe, Eurostoxx 50 futures (FESX1!) exhibited a modest downturn of 0.12%, while German DAX futures (DAX1!) recorded a slight uptick of 0.06%. These shifts indicate a degree of cautiousness and mirroring of the tentative sentiments witnessed in the Asian markets. Investors and analysts are keenly observing these developments as they navigate the global financial landscape on approach of the two final days of February 2024.

Concurrently, the New Zealand dollar experienced a notable decline following the Reserve Bank of New Zealand's (RBNZ) tempered hawkish stance on interest rates. The RBNZ, in its decision on Wednesday, chose to maintain the cash rate at 5.5%, citing successful mitigation of inflationary pressures through previous rate increases. However, the central bank also communicated a reduced likelihood of future rate hikes. This led to a 0.75% depreciation of the New Zealand dollar, settling at $0.61235 for the day. Charu Chanana, Head of Currency Strategy at Saxo, commented on the unexpected shift in the RBNZ's stance, stating, "The RBNZ has closed the door to further rate hikes, which was a surprise to somewhat hawkish expectations." Despite the immediate impact on NZD longs, Chanana emphasized that the New Zealand dollar still presents a robust carry in the current low volatility environment.

In the currency markets, the U.S. dollar index (DXY), a measure against a basket of peers, posted a modest gain of 0.14%, reaching 103.98. Surprisingly, the RBNZ's decision to maintain the cash rate at 5.5% led to a 1% depreciation of the New Zealand dollar (NZDUSD), reaching its lowest level since February 16 at $0.61110. Simultaneously, the Australian dollar (AUDUSD) experienced a decline following data indicating that January's inflation maintained a yearly pace of 3.4%, falling short of the market's anticipated 3.6%. The Australian dollar concluded the session down by 0.44% at $0.65140.

In European markets, the euro (EURUSD) exhibited a marginal decline, closing 0.17% lower at $1.08270. The British pound (GBPUSD) recorded a 0.2% decrease, trading at $1.2660. Meanwhile, the Japanese yen (USDJPY) weakened by 0.08% against the U.S. dollar, settling at 150.61.

Investor attention was directed towards the upcoming release of the personal consumption expenditures price index (PCE) for January on Thursday, a key inflation metric favored by the Federal Reserve. Expectations from a Reuters poll indicated a 0.3% monthly increase in January.

Market participants adjusted their expectations for early and aggressive interest rate cuts by the Federal Reserve, shifting the anticipated starting point from March to June. Current expectations reflect 77 basis points of cuts for the year, compared to the initial projection of 150 bps at the beginning of the year.

Yuting Shao, Macro Strategist at State Street Global Markets, emphasized the significance of individual data releases in shaping expectations for a data-dependent Federal Reserve. Shao noted, "Although one data point does not make a trend, latest inflation and employment readings have raised the prospect that perhaps no landing scenario is driving many asset markets."

In recent days, several Federal Reserve policymakers have resisted premature rate cuts. Federal Reserve Governor Michelle Bowman expressed reluctance to hastily cut U.S. interest rates, citing potential upside risks to inflation. The Australian dollar experienced fluctuations in early trading after data revealed that consumer price inflation in January remained at a two-year low. The Australian dollar was 0.11% lower at $0.6537. The U.S. dollar index showed a marginal increase of 0.01%.

In the commodities market, U.S. crude fell by 0.41% to $78.55 per barrel, while Brent was at $83.31, down 0.41% for the day. Gold prices experienced a modest uptick, rising 0.1% to $2,030.83 per ounce amidst prevailing market uncertainty. In the copper market, prices remained relatively unchanged, reflecting equilibrium in the global trading landscape. Arabica coffee futures for May (KCK24) and May ICE robusta coffee (RMK24) demonstrated positive momentum, marking a rebound from recent lows. This upward movement was influenced by short covering in coffee futures following updated weather forecasts indicating limited rainfall in Brazil's crucial coffee-growing regions. Raw sugar futures observed a notable 3% increase, reaching a two-week high, driven by concerns about insufficient rainfall in Brazil, the world's leading sugar producer. The March raw sugar contract (SB1!) concluded the day with a gain of 0.69 cents, representing a 3% increase, and settling at 23.84 cents per pound.

With additional economic data scheduled for release this week, including the second estimate of gross domestic product, jobless claims, and manufacturing activity, market sentiment and expectations from the Federal Reserve are expected to be further influenced.

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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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