Stock Markets

The WSJ Markets report shows that the Dow Jones Industrial Average (DJIA) fell by 2.27% while the Dow Jones Total Stock Market dropped by 1.10% for the week. The broader S&P 500 Index gave up 0.95% of its value which was mirrored in the performance of small, mid, and large-cap stocks. Technology stocks fared only slightly better as the Nasdaq Stock Market Composite lost 0.80%, while the NYSE Composite slumped by 1.04%. The CBOE Volatility Index (VIX), the indicator of investor risk perception, rose by 23.21%.

The pull-back, particularly among the large-cap indexes, occurred in tandem with U.S. Treasury yields increasing in response to signs that the manufacturing sector might finally be gaining traction. Growth stocks fared better than value shares while small-caps fell further than large-caps, suggesting that the market performance has once more narrowed. Oil prices reached their highest level since October causing energy stocks to outperform, largely on worries over rising tensions between Israel and Iran and a decision by major exporters to maintain production limits despite tight supply. The technology sector also got a boost from some late strength in Microsoft stock.

U.S. Economy

The release of the March ISM manufacturing report drove the equities market on Monday. Readings came in well above expectations and indicated expansion, though barely, for the first time in 16 months. More importantly from an inflation perspective, the ISM prices paid index surprised on the upside and seemingly confirmed recent data showing a rebound in input prices. On the other hand, the ISM services report which was released on Wednesday appeared to have a calming effect on the markets. Although it still indicated expansion, the services index slid back for the second consecutive month. More significantly, the index of prices paid fell back to its lowest level since the pandemic lockdowns began in March 2020. This data appeared to increase market participants’ hopes that a Federal Reserve rate cut may materialize in June, as reflected in futures prices.

Typically, among the most closely watched indicators of growth and inflation pressures, the Friday jobs report from the Labor Department appeared to further reassure investors. In March, employers added 303,000 jobs which is well above expectations and the most in almost a year. The solid gains came with only a modest increase in average hourly wages, from 0.2% in February to 0.3% in March, an encouraging sign from a wage pressures standpoint. Part of the reason may be traced to a rise in the labor force participation rate, indicating that employers might be enjoying an easier time filling empty slots.

Metals and Mining

This was another remarkable week that saw a nearly 5% gain for gold in a rally that seemed unstoppable. The yellow metal took off to quickly pierce what was initially thought to be a significant resistance at $2,300 so soon after it broke out of the $2,200 level. Gold’s movement this week re-established this precious metal as a global monetary asset rather than a U.S. dollar-centric asset. One of the most bullish banks on gold at the start of the year, Bank of America, reiterated its target of $2,400 per ounce. Analysts note how gold demonstrates less dependence on U.S. interest rates and monetary policy, making it less vulnerable to a future Federal Reserve decision on the likelihood of when a rate reversal takes place. In this environment, gold prices are not sensitive to whether U.S. bond yields rise or the currency strengthens. Central banks will continue to accumulate gold to diversify their foreign reserves into an asset without any third-party geopolitical risks. According to analysts, those who missed the gold rally should turn their attention to silver as the next vehicle.

The spot prices of precious metals are mostly up this week. Gold surged by 4.48%, closing this week at $2,329.75 per troy ounce, from last week’s close at $2,229.87. Silver ended this week at an impressive 10.10% higher than last week’s close at $24.96, to close this week at $27.48 per troy ounce. Platinum jumped by 2.11% from its last traded price one week ago at $911.29 to its last traded price this week of $930.56 per troy ounce. Palladium bucked the trend to end lower by 1.07%, dipping from its close last week at $1,016.55 to its close this week at $1,005.63 per troy ounce. The three-month LME prices of industrial metals closed bullish this week. Copper, which traded last at $8,867.00 one week ago, ended 5.55% up at $9,359.00 per metric ton. Aluminum shot up by 4.60% from last week’s close at $2,337.00 to this week’s close at $2,444.50 per metric ton. Zinc surged by 8.47% from its previous weekly close at $2,439.00 to close this week at $2,645.50 per metric ton. Tin gained 4.34% from its last week’s price of $27,451.00 to this week’s last trading price of $28,643.00 per metric ton.

Energy and Oil

On Friday morning, at the back of the current wave of bullish news, Brent prices broke out of the $90 per barrel threshold and quickly shot through the $91 per barrel level. Contributing factors are the anticipation of Iran’s retaliatory strike on Israel, a developing shortage in Mexico’s exports, and the continuation of OPEC+ cuts, which have recently boosted sentiment in the global oil market. It is possible, however, that the potential of the Fed not cutting interest rates this year may douse hopes on the sustainability of the oil price rally. One other consideration is the decision of the U.S. Energy Department to scrap its tender to buy 3 million barrels of strategic petroleum stocks in August and September. The decision was made to “keep the taxpayer’s interest at the forefront” in light of WTI rising to $86 per barrel in the same week.

Natural Gas

For the report week beginning Wednesday, March 27, and ending Wednesday, April 3, 2024, the Henry Hub spot price ascended by $0.42 from $1.44 per million British thermal units (MMBtu) to $1.86/MMBtu. Regarding the Henry Hub futures price, the price of the May 2024 NYMEX  contract increased by $0.123, from $1.718/MMBtu at the beginning of the report week to $1.841/MMBtu at the week’s end. The price of the 12-month strip averaging May 2024 through April 2025 futures contracts climbed by $0.091 to $2.818/MMBtu.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.02 to a weekly average of $9.51/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.32 to a weekly average of $8.42/MMBtu. By comparison, the week last year that corresponds to this report week (the week from March 29 to April 5, 2023), the prices were $12.96/MMBtu in East Asia and $14.96/MMBtu at the TTF.

World Markets

European stocks descended this week as the pan-European STOXX Europe 600 lost by 1,19% in local currency terms during the holiday-shortened trading week. The drop interrupted 10 consecutive weeks of gains, attributable to investor reactions to hawkish comments from some U.S. Federal Reserve policymakers. Higher crude oil prices also heightened doubts about the timing of anticipated future interest rate cuts. Italy’s FTSE MIB plunged by 2.13%, France’s CAC 40 Index lost 1.76%, and Germany’s DAX dropped by 1.72%. The UK’s FTSE 100 Index slid by 0.52%. The headline inflation in the eurozone slowed down more than expected to 2.4% in March from 2.6% in February. Also decelerating was core inflation, which excludes volatile food and energy prices, from 3.1% to 2.9%. However, the year-over-year increase in service prices came in at 4.0% for the fifth straight month. The economic data suggests that after stagnating for the past year, the economy may be picking up. S&P Global revised its forecast, from 49.9 to 50.3 in March, for the eurozone’s composite purchasing managers’ index (PMI) which includes manufacturing and services. This is significant because a reading north of 50 indicates expansion in private-sector business activity.

Japanese stocks were under selling pressure for the week, causing the Nikkei 225 Index to slump by 3.4% and the broad TOPIX fall by 2.4%. The reasons were traced to heightened geopolitical tensions and continued uncertainty about the Federal Reserve’s monetary policy direction. Both weighed in general on global equities; on the domestic scene, Japanese investors remained concerned about whether the authorities would conduct an intervention to prop up the falling yen. According to the Finance Ministry, they remained ready to respond to excessive moves in the foreign exchange markets. The Japanese currency maintains its rate at the high-JPY 151 level against the U.S. dollar, its lowest level in the last 34 years. Over the past three years, the yen’s weakness has given Japan’s exporters an advantage, providing dollar-earning companies a major boost in so far as they derive a large share of their revenues from abroad. Speculation about intervention was propelled by signals from Bank of Japan (BoJ) Governor Kazuo Ueda that the central bank could use monetary policy to address the historic weakness in the yen. They have indicated that any action taken on the normalization of monetary policy relies on two preconditions being met – the 2% inflation target attained sustainably, and growth in wages.

Chinese equities advanced in the holiday-shortened trading week in reaction to data that suggests that the economy could be gaining traction. The Shanghai Composite Index rose by 0.92% while the blue-chip CSI 300 gained by 0.86%. The Hong Kong benchmark Hang Seng Index advanced by 1.10%. Financial markets in mainland China suspended operations on Thursday and Friday in observance of the Qingming Festival. Also known as Tomb Sweeping Day, these are the holidays when Chinese people honor their ancestors by cleaning and placing offerings on their tombs. In Hong Kong, the markets were closed on Thursday but reopened on Friday. March economic indicators strengthened hopes that China may soon see a full economic recovery. The official manufacturing PMI climbed to 50.8 in March (which was better than expected) from 49.1 in February, largely due to a rebound in production and exports, thus marking the first expansion since September 2023. The nonmanufacturing PMI grew to 53.0, a better-than-forecasted outcome for March, from 51.4 in February. On the other hand, the value of new home sales by the country’s top 100 developers dipped by 49% in March from one year ago, easing from the 60% drop in February. Although sales rose by 93% from the previous month, they remained weak compared with the monthly average for the third and fourth quarters of last year.  

The Week Ahead

The CPI and PPI inflation data, as well as the FOMC minutes from the March meeting, are among the important economic data scheduled to be released in the coming week.

Key Topics to Watch

• Chicago Fed President Austan Goolsbee’s radio interview
• NFIB optimism index for March
• Consumer price index for March
• Core CPI for March
• CPI year-over-year
• Core CPI year-over-year
• Fed Gov. Michelle Bowman speaks (Wednesday, April 10)
• Wholesale inventories for March
• Chicago Fed President Austan Goolsbee speaks (Wednesday, April 10)
• Minutes of Fed’s March FOMC meeting
• Monthly U.S. federal budget for March
• Initial jobless claims for April 6, 2024
• Producer price index for March
• Core PPI for March
• PPI year-over-year
• Core PPI year-over-year
• Fed Gov. Michelle Bowman speaks (Thursday, April 11)
• Boston Fed President Susan Collins speaks
• Chicago Fed President Austan Goolsbee speaks (Thursday, April 11)
• Atlanta Fed President Raphael Bostic speaks (Thursday, April 11)
• Import price index for March
• Import price index minus fuel for March
• Consumer sentiment (prelim) for April
• Atlanta Fed President Raphael Bostic speaks (Friday, April 12)
• San Francisco Fed President Mary Daly speaks

Markets Index Wrap-Up

Stock Markets

This shortened trading week ahead of the Holy Week holy days, the Dow Jones Industrial Average (DJIA) ended higher by 0.07% and the DJ Total Stock Market gained by 0.32%. The broad S&P 500 Index rose by 0.24%; however, the technology-heavy Nasdaq Stock Market Composite lost by 0.14%. The NYSE Composite Index climbed by 0.54%. The indicator of investor risk perception, the CBOE Volatility Index (VIX), inched up by 0.70%, suggesting the expectation of increased volatility ahead.

As indicated by the S&P 500 Index which recorded new closing and intraday highs to end the week, the market’s advance was notably broad as most of the indexes ended the first quarter of 2024 with strong gains. The equal-weighted version of the S&P 500 Index gained 1.64% which is well ahead of the gains realized by the market-weighted version. Small-cap stocks easily outperformed large caps; the Russell 1000 Value Index surged by 1.79%, outperforming its growth counterpart which declined by 0.60%. Markets were closed on Friday in observance of the Good Friday holiday. They are scheduled to reopen on Monday ahead of other international markets. When they do reopen, analysts expect trading volumes to pick up to some degree as investors weigh the impact of the collapse of the Francis Scott Key Bridge in Baltimore and the degree to which it cut access to the nation’s largest ports. The port of Baltimore is the primary port for car and truck shipments.

U.S. Economy

The broader economic implications of the Baltimore port shutdown remain uncertain amid promises made by President Joe Biden that federal aid will soon be coming to quickly reopen the port. This week’s economic calendar saw a report released by the Commerce Department that durable goods rose by 1.4% in February which is slightly more than expected. Part of this increase, however, was due to a revision in January’s steep decline, from 6.2% to 6.9%. If volatile defense and aircraft segments were excluded (to arrive at a gauge that is considered more closely reflective of business spending plans), orders are seen to rise by a solid 0.7%, much more than anticipated and partly reversing two months of declines. In February, new home sales fell unexpectedly, although the report of the decline came in the wake of previous news of a jump in sales of existing homes.

Consumer indicators released this week were mixed, indicative of uncertainty in the direction of the economy. The Conference Board announced on Tuesday that its index of consumer confidence slightly declined in March, which defied consensus expectations for an increase. The Board’s chief researcher noted that “Consumers’ assessment of the present situation improved in March, but they also became more pessimistic about the future.” A different and more optimistic assessment by another research institute came on Thursday from the University of Michigan’s rival gauge of consumer sentiment. This metric was revised upward to its highest level in 21 months, attributable in large part to waning inflation concerns. This chief researcher noted that “Over the first three months of 2024, consumers have consistently expressed that the economy appears to be holding its course. However, with the general election looming on the horizon, many mentioned that their views remain tentative and subject to change.”

Metals and Mining

This week, the spot prices of precious metals gained over the previous week. Gold rose by 2.98%, from $2,165.44 to this week’s $2,229.87 per troy ounce. Silver appreciated by 1.18%, rising from the previous week’s close at $24.67 to this week’s close at $24.96 per troy ounce. Platinum climbed by 1.44% from its previous weekly closing price of $898.35 to this week’s closing price of $911.29 per troy ounce. Palladium added 2.90% to its previous week’s close of $987.93 to this week’s close of $1,016.55 per troy ounce. The three-month LME prices of industrial metals were mixed. Copper lost 0.93% from last week’s close at $8,950.50 to this week’s close at $8,867.00 per metric ton. Aluminum gained by 1.54% from its last weekly closing price of $2,301.50 to this week’s closing price of $2,337.00 per metric ton. Zinc fell by 3.39% from the previous week when it closed at $2,524.50 to this week’s close of $2,439.00 per metric ton. Tin gave up 1.51% of its previous week’s end at $27,872.00 to close this week at $27,451.00 per metric ton.

Energy and Oil

Oil market players appear to increasingly rely on OPEC+ production cuts remaining in place for the rest of the year. If this continues as expected, combined with an improving macroeconomic outlook, crude prices could be expected to reach $90 per barrel sooner than previously thought. If the U.S. fourth-quarter GDP proves to be better than expected, it may consolidate market expectations surrounding an interest rate cut by June and dispel the demand woes of early 2024. This week ICE Brent hovers about $87 per barrel whilst WTI trades around $83 per share. In the meantime, the U.S. ramps up its sixth round of targeted Iran sanctions as the Department of Treasury sanctioned a Houthi-linked network of companies that allegedly moves Iranian oil through forged documents.  

Natural Gas

For the report week beginning Wednesday, March 20, and ending Wednesday, March 27, 2024, the Henry Hub spot price declined by $0.13 from $1.57 per million British thermal units (MMBtu) to $1.44/MMBtu. Concerning Henry Hub futures prices, the April 2024 NYMEX contract expired on Tuesday at $1.575/MMBtu, down by $0.12 from the close of the previous week. The May 2024 NYMEX contract price decreased to $1.718/MMBtu, lower by $0.13 from the previous week. The price of the 12-month strip averaging May 2024 through April 2025 futures contracts declined by $0.09 to $2.728/MMBtu.

This week, International natural gas futures price changes were mixed. The weekly average front-month futures prices for LNG cargoes in East Asia rose by $0.21 to a weekly average of $9..48/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.11 to a weekly average of $8.74/MMBtu. In the week last year corresponding to this report week (the week from March 22 to March 29, 2023), the prices were $12.72/MMBtu in East Asia and $13.47/MMBtu at the TTF.   

World Markets

In a week of generally light trading ahead of the Easter holiday weekend, most European markets saw modest gains. The STOXX Europe 600 Index reached a record intraday high this week, gaining by 0.59% in local currency terms. The market’s gains were noteworthy since they came despite confirmation of a significant slowdown in some major economies. As the European Central Bank (ECB) flagged a possible rate cut for June, European government bond yields declined over the week. The decision to cut rates depends on whether wage growth continues to moderate. ECB council member Fabio Panetta was the latest to flag a turn in the rate cycle, with data showing eurozone bank lending stagnated again in February. The UK entered a technical recession in the fourth quarter of 2023 for the first time since early 2020. The economy contracted by 0.3% following a third-quarter contraction of 0.1%, as confirmed by the UK’s Office of National Statistics. In Germany, the Federal Statistical Office reported that sales in that country plunged by 1.9% in February, well below consensus expectations for a small increase and the biggest drop in 17 months. Leading economic institutions in that country expect the economy to grow by 0.1% in 2024, cutting the prior forecast of 1.3%. Hopes for a stronger recovery have been dented by high-interest rates, weak global demand, and political uncertainty. On the whole, however, data suggests that European consumers are growing slightly more optimistic because of the region’s easing energy concerns.

Japan’s stock markets plummeted through Thursday’s trading as investors focused on the sharp decline of the yen. The currency hovered near JPY 152 against the dollar, a sign that many perceived may trigger authorities to intervene in the foreign exchange markets to prop up the yen. After a meeting on Wednesday, the country’s three main monetary authorities suggested that they could be ready to stage an intervention. It is the strongest hint to date after the currency dipped to a 34-year low. Since Japan’s large-cap exporters derive a significant share of their earnings from overseas, they benefited largely from the historic weakness in the yen which is now threatened by a possible government intervention. The yield on the 10-year Japanese government bond dipped to about 0.70% on Thursday from 0.74% at the end of the weak prior. This dovetailed the historic monetary policy shift by the Bank of Japan (BoJ) wherein it raised interest rates from negative territory for the first time in nearly seven years. The market’s expectations are for two more BoJ interest rate hikes within the coming 12 months. The end of the central bank’s negative rates policy is the first step toward monetary policy normalization.

Chinese stocks ended the week on Thursday, down due to concerns about the continuing property sector downturn which continues to weigh on investor confidence. The Shanghai Composite Index declined by 1.23% while the blue-chip CSI 300 retreated by 0.68%. The Hong Kong benchmark Hang Seng Index inched upward by 0.25%. At the China Development Forum, an annual summit for global business leaders, Chinese Premier Li Qiang announced to the Forum participants that the country is open to foreign investment. He also pledged that the government will accelerate measures to support growth in several sectors, including biological manufacturing artificial intelligence, and the data economy. Beijing’s pro-business message, however, coincides with many investors seeking evidence that China will further increase policy support to meet its growth goals. If the government conducts pro-market reforms, International Monetary Fund Managing Director Kristalina Georgieva said that China’s economy could expand a further 20% over the next 15 years.  

The Week Ahead

The March nonfarm payrolls report and the ISM manufacturing PMI are among the important economic data scheduled for release this week.

Key Topics to Watch

• S&P U.S. manufacturing PMI (final) for March
• Construction spending for February
• ISM manufacturing for March
• Fed Governor Lisa Cook speaks
• Factory orders for February
• Job openings for February
• Fed Governor Michelle Bowman speaks (Tuesday, April 2)
• Cleveland Fed President Loretta Mester speaks (Tuesday, April 2)
• San Francisco Fed President Mary Daly speaks
• U.S. auto sales for March
• ADP employment for March
• S&P U.S. services PMI (final) for March
• Fed Governor Michelle Bowman speaks (Wednesday, April 3)
• ISM services for March
• New York Fed President John Williams moderates discussion
• Fed Chair Jerome Powell speaks
• Fed Vice Chair for Supervisions Michael Barr speaks
• Fed Governor Adriana Kugler speaks (Wednesday, April 3)
• Initial jobless claims for March 30
• U.S. trade balance for February
• Philadelphia Fed President Patrick Harker speaks
• Richmond Fed President Tom Barkin speaks (Thursday, April 4)
• Chicago Fed President Austan Goolsbee speaks
• Cleveland Fed President Loretta Mester speaks (Thursday, April 4)
• Minneapolis Fed President Neel Kashkari speaks
• Fed Governor Adriana Kugler speaks (Thursday, April 4)
• U.S. nonfarm payrolls for March
• U.S. unemployment rate for March
• U.S. hourly wages for March
• Hourly wages year-over-year
• Richmond Fed President Tom Barkin speaks (Friday, April 5)
• Dallas Fed President Lorie Logan speaks
• Fed Governor Michelle Bowman speaks (Friday, April 5)
• Consumer credit for March

Markets Index Wrap-Up

Stock Markets

U.S. stock markets across the board have rallied during trading the week. The Dow Jones Industrial Average (DJIA) rose by 1.97% and the Dow Jones Total Stock Market climbed even higher, up by 2.27% for the week. The latter was closely mirrored by the S&P 500 Index which gained by 2.29%, but they were both outperformed by the technology-tracking Nasdaq Stock Market Composite which rose by 2.85%. The NYSE Composite gained by 1.48% and, consistent with the robust performance of the markets, the investor risk perception indicator, the CBOE Volatility Index (VIX), dipped by 9.37% for the week.

The markets welcomed the dovish messaging that the Federal Reserve transmitted by leaving the federal funds rate unchanged at 5.25% to 5.50% during its March FOMC meeting. The Fed also released an updated set of economic projections but underscored that it would maintain its outlook regarding rate cuts this year. Communication services led the gains for the week along with technology shares, accounting for the Nasdaq’s outperformance. Artificial intelligence chipmaker NVIDIA reached a record high on Friday, helped by a late rise that resulted in the stock’s market capitalization rising to almost $2.4 trillion. Also boosting sentiment in the technology sector are reports that Apple might partner with Google parent Alphabet in offering generative artificial intelligence tools. Lagging sectors included health care and real estate. In the coming week, trading is scheduled to end on Thursday in observance of the Good Friday holy day.

U.S. Economy

The inflation readings for January and February were somewhat hotter than expected. Nevertheless, Fed Chair Jerome Powell commented that the Fed sees “inflation coming gradually down to 2% on a sometimes-bumpy path.” Powell seemed not overly concerned about the uptick in the inflation data in January and February, which he attributed to seasonal noise. Other economic data for the week supported hopes that the economy was continuing to expand without reigniting inflation pressures. The more significant economic news was February’s existing home sales which was reported on Thursday, surprising most observers by jumping 9.5%. A gauge of current manufacturing in the Mid-Atlantic region drew back slightly from February’s reading, although it surprised investors by signaling a second straight month of expansion. Prices paid by businesses in the region fell back to their lowest level since May 2020, sending encouraging signals to the market. The announcement by the Fed also helped to drive longer-term Treasury yields lower over the week, and consequently bond prices higher since bond prices and yields move in opposite directions.

Metals and Mining

Despite its slight gain, the price of gold ended the week somewhat heavy as the precious metal encountered some selling pressure after it hit a new record high above $2,220 per ounce. Partly, the bullish sentiment may be attributed to the most recent interest rate expectations announced by the Federal Reserve. While the central bank still sees three rate hikes this year, it is embarking at the same time on a new easing cycle as inflation is expected to remain above its 2% target. Stubborn inflation simultaneous with falling interest rates suggests that real interest rates will be headed lower and put some pressure on the U.S. dollar, thus weakening two major headwinds for gold.

The spot market for precious metals moved sideways for the week and ended mixed. Gold closed the week at $2,165.44 per troy ounce, 0.44% higher than its last weekly close at $2,155.90. Silver ended at $24.67 per troy ounce for the week, down by 2.06% from last week’s closing price of $25.19. Platinum closed the week at $898.35 per troy ounce, a drop of 4.32% from last week’s close at $938.89.  Palladium ended the week at $987.93 per troy ounce, which is 8.61% lower than the previous week’s ending price of $1,080.98. The three-month LME prices of the industrial metals were also mixed. Copper gained slightly at 0.71% from last week’s close at $8,887.50 to end this week at $8,950.50 per metric ton. Aluminum rose by 2.22% over last week’s close at $2,251.50 to end this week at $2,301.50 per metric ton. Zinc declines marginally by 0.92% from last week’s closing price of $2,548.00, thus ending this week at $2,524.50 per metric ton. Tin            descended by 1.37% from its last weekly close at $28,258.00 for a closing price this week of $27,872.00 per metric ton.

Energy and Oil

Some downward momentum for ICE Brent was created by renewed hopes of a potential ceasefire in Gaza. ICE Brent slid back to $85 per barrel as reports of the U.S. urging Ukraine to halt strikes on Russian refineries presented another opportunity to curb the existing geopolitical risk facing oil. While the current correction weighs on oil prices, outlooks for the rest of the year are getting increasingly bullish as evidenced by the EIA lifting its Brent forecast to $88 per barrel, up $4 per barrel from last month. In other news from the US’s neighbor to the north, the first-ever cargo of Access Western Blend from TMX was bought by Chinese refiner Sinochem as line fill of Canada’s Trans Mountain Expansion pipeline moves ahead. The purchase price was reportedly at a $5 per barrel discount to Brent on a delivered China basis.

Natural Gas

For the report week from Wednesday, March 13 to Wednesday, March 20, 2024, the Henry Hub spot price climbed by $0.33 from $1.24 per million British thermal units (MMBtu) to $1.57/MMBtu. Concerning Henry Hub futures, the price of the April 2024 NYMEX contract increased by $0.041, from $1.658/MMBtu at the start of the report week to $1.699 by the week’s end. The price of the 12-month strip averaging April 2024 through March 2025 futures contracts increased by $0.021 to $2.709/MMBtu. Regional natural gas spot price changes were mixed for this report week, ranging from an increase of $1.46/MMBtu at Algonquin Citygate to a decrease of $0.28/MMBtu at SoCal Citygate.

International natural gas futures prices increased for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.82 to a weekly average of $9.27/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.70 to a weekly average of $8.84/MMBtu. In the week last year corresponding to this report week (the week from March 15 to March 22, 2023), the prices were $13.24/MMBtu in East Asia and $13.14/MMBtu at the TTF.

World Markets

European stocks rallied this week, with the pan-European STOXX Europe 600 Index ending near a record high after climbing 1.03% in local currency terms. The buy-up was largely due to dovish signals from central banks in the member countries which boosted risk-on sentiment. Germany’s DAX surged by 1.58% while Italy’s FTSE MIB gained 1.30%. Some indexes went against the current, such as France’s CAC 40 Index which declined by 0.17%. On the other hand, the UK’s FTSE 100 shot up by 2.70%. European government bond yields fell on a weak purchasing managers’ survey for Germany and a reduction in Swiss interest rates. Bond yields in the UK also fell, mainly due to the Banks of England (BoE) striking a dovish note at its policy meeting. For a fifth consecutive time, the BoE kept interest rates unchanged at 5.25%, but the market interpreted this time around as a more dovish signal due to the 8-to-1 in favor of the move. Two policymakers who previously called for a hike in borrowing costs reversed their stance in favor of keeping the rate unchanged. In the meantime, the output of goods and services in the eurozone came close to stabilizing in March, as PMI surveys showed, with a first estimate recording only a marginal decline, as noted by S&P Global.

Japan’s stocks registered weekly gains due mainly to yen weakness resulting from the Bank of Japan’s (BoJ’s) unexpected hawkish tilt. The BoJ raised interest rates for the first time since 2007, earlier than was priced in by market participants. Both of Japan’s indexes rallied to record-high levels, with the Nikkei 225 Index gaining 5.6% and the broader TOPIX Index advancing by 5.3%. Positive investor sentiment was further generated by expectations that the U.S. Federal Reserve will cut interest rates in 2024, based on the state of inflationary conditions and the growth prospects of the economy. On fixed-income instruments, the Japanese government bond yields descended after the Bank of Japan (BoJ) took a policy shift that the market had been much anticipating and exited its negative interest rate policy. Following reports from the previous week of major companies agreeing to robust pay increases in annual wage talks, the BoJ announced that it will set a policy rate target of 0 to 0.1%, up from -0.1%. The central bank Governor Kazuo Ueda, however, affirmed that financial conditions would remain accommodative since inflation expectations were still below the 2% target. Consumer price inflation as measured by the consumer price index (CPI) annualized over February rose to a higher-than-anticipated 2.8%, a sharp rise from 2.0% in January.

Chinese equities suffered a sell-off, leading indexes southward due to concerns about the property sector slump offsetting better-than-expected economic data. The Shanghai Composite Index slid by 0.22% while the blue-chip CSI 300 declined by 0.70%. The Hong Kong benchmark Hang Seng Index lost by 1.32%. In the January-February period, property investment in China fell by 9% from a year earlier, which is an improvement over the 24% slump in December. In the first two months of the year, property sales by floor area descended by 20.5% after slumping 23% in December. Beijing’s roll-out of numerous pro-growth measures to arrest China’s yearslong real estate slump accounted for the slower pace of declines in property investment and sales. Most investors, however, chose to remain on the sidelines or approach China’s property sector with caution. Developers continue to struggle with high debt levels and weak homebuyer demand. Other data show that other segments of China’s economy were starting to pick up. Industrial production rose by 7% in January and February year-on-year which is higher than forecasted and up from 6.8% in December. Also in the first two months of 2024, fixed-asset investment grew by 4.2% year-on-year compared to 3% in December amid higher infrastructure growth. Retail sales surged for the same period, largely due to the weeklong Lunar New Year holiday.

The Week Ahead

Consumer confidence, PCE inflation data, and the second revision of the fourth-quarter GDP are among the important economic data expected to be released in the coming week.

Key Topics to Watch

• Atlanta Fed President Raphael Bostic speaks
• Chicago Fed President Austan Goolsbee speaks
• New home sales for February
• Fed Gov. Lisa Cook speaks
• Durable-goods orders for February
• Durable-goods minus transportation for February
• S&P Case-Shiller home price index (20 cities) for January
• Consumer confidence for March
• Fed Gov. Christopher Waller speaks
• Initial jobless claims for March 23
• Gross Domestic Product (2^nd revision) for Fourth Quarter
• Chicago Business Barometer (PMI) for March
• Pending home sales for February
• Consumer sentiment (final) for March
• Advanced U.S. trade balance in goods for February
• Advanced retail inventories for February
• Advanced wholesale inventories for February
• Personal income (nominal) for February
• Personal spending (nominal) for February
• PCE Index for February
• Core PCE Index for February
• PCE (year-over-year)
• Core PCE (year-over-year)
• Fed Chair Jerome Powell speaks

Markets Index Wrap-Up

Stock Markets

As investors weighed the upside surprises in inflation data and signs of moderating consumer spending, stocks moved mostly lower for the week. Among the major indexes, the Dow Jones Industrial Average (DJIA) held up the best, ticking downward 0.02% while the Dow Jones Total Stock Market also slipped 0.34%. The S&P 500 Index also lost 0.13% with both midcap and small-cap issues down. The technology-tracking Nasdaq Stock Market Composite likewise lost 0.70%, as did the NYSE Composite which fell by 0.23%. All Russell indexes were down.

The CBOE Volatility Index (Vix), which is an indicator of investor risk perception, descended by 2.24% over the week. The DJIA’s performance, which was the least eroded among the indexes, was helped by the record high it reached on Wednesday before falling back to end the week only slightly down. Among the sectors, energy shares outperformed due to higher oil prices, and technology shares lagged due to weakness in NVIDIA and other chipmakers.

U.S. Economy

Consumer inflation data were released on Tuesday. The consumer price index (CPI) released by the Labor Department was modestly in line with consensus expectations, rising 0.4% in February. However, core prices (excluding food and energy) rose also by 0.4% which is slightly higher than expected, It appears that investors took the upside core surprise largely in stride, in part due likely to a continued increase in shelter costs which is generally considered a lagging indicator of overall inflation trends. Apparel costs, which remained flat over the past 12 months, jumped 0.6%.

On Thursday, producer inflation data were released and, compared to the surprise caused by their consumer counterpart, triggered greater investor concern. The producer price index (PPI) rose by 0.6% in February, the most in six months. It is also roughly double consensus estimates, and even if core producer prices rose by only 0.3%, this latter indicator also exceeded expectations, albeit slightly. Headline producer prices ascended by 1.6% year-over-year, which is well above expectations and at its highest level since September. The data appears to contradict hopes that low inflation or even deflation in producer prices would eventually result in lower prices paid by consumers.

The retail sales report, which was also released on Thursday, also surprised investors with its weakness. The Commerce Department reported that retail sales climbed by only 0.6% in February, missing expectations largely due to higher gasoline prices. It should be recalled that retail sales data are not adjusted for inflation. Even online sales notably declined by 0.1% which results in a sharp deceleration from the 6.4% increase over the past 12 months. Also increasing at a slower pace are sales at restaurants and bars which rose by 0.4%. The slower growth is largely interpreted as growing caution among consumers. As if to confirm this, the survey of consumer sentiment conducted by the University of Michigan the results of which were released on Friday indicated a modest decline in consumer expectations. The survey’s lead research concluded that Americans perceived “few signals that the economy is currently improving or deteriorating.”

Metals and Mining

The gold market consolidated this week, presumably before it resumes its upward trend after digesting its strong gains over the past weeks. Analysts have opined that gold and silver are just beginning to take off to higher levels after breaking a consolidation pattern that prevailed over the years. The reason for the market’s bullishness on these precious metals is that they have been largely ignored in the broader marketplace, making the breakout with volume much more significant. While the record highs realized by gold may partially be attributed to bullish speculation, this breakout coincides with holdings in gold-backed exchange-traded funds holding at multi-year lows. This situation in the marketplace may continue to support the long-term gold uptrend.

The spot prices of precious metals were mixed. Gold lost by 1.06% from its week-ago close at $2,178.95 to end at $2,155.90 per troy ounce. Silver, on the other hand, gained by 3.62% from its closing price last week of $24.31 to end this week at $25.19 per troy ounce. Platinum gained by 2.67% from its last weekly closing price of $914.49 to close this week at $938.89 per troy ounce. Palladium likewise gained by 5.60% from its close last week at $1,023.63 to this week’s close at $1,080.98 per troy ounce. The three-month LME prices of base metals were also mixed. Copper gained by 2.86%, from its last weekly close at $8,640.50 to its recent weekly close at $8,887.50 per metric ton. Aluminum slid by 0.07% from its closing price last week of $2,253.00 to its closing price this week of $2,251.50 per metric ton. Zinc gained by 0.51% from last week’s closing price of $2,535.00 to this week’s closing price of $2,548.00 per metric ton. Tin gained by 2.36% over the week, from last week’s close at $27,607.00 to this week’s close at $28,258.00 per metric ton.

Energy and Oil

For the first time since November, the oil markets are exhibiting bullish sentiments with the breakout of Brent futures above the $85 per barrel significant price level. This may be taken as an indication that the market is finally starting to shed its bearish cautiousness. The Ukraine drone strikes on Russian refineries this week, as well as declining U.S. inventories, appear to be motivating factors for the oil price breakthrough. According to Russia’s Energy Ministry, several large-scale drone attacks took place this week on Russian refineries in Nizhny Novgorod, Ryazan, and Novoshakhtinsk, triggering an impending rise in Russia’s crude exports in defiance of OPEC+ commitments. In the meantime, China’s offshore-focused state oil firm CNOOC announced the discovery of Kaiping South in deepwater South China Sea. The find is believed to contain more than 100 million tons of oil equivalent in recoverable volumes.

Natural Gas

For the report week spanning Wednesday, March 6 to Wednesday, March 13, 2024, the Henry Hub spot price fell by $0.42 from $1.66 per million British thermal units (MMBtu) to $1.24/MMBtu, the lowest price in inflation-adjusted terms since at least 1997. Concerning Henry Hub futures prices, the price of the April 2024 NYMEX contract decreased by $0.271 from $1.929/MMBtu at the start of the report week to $1.658/MMBtu at the week’s end. The price of the 12-month strip averaging April 2024 through March 2025 futures contracts declined by $0.142 to $2.688/MMBtu.

International natural gas futures price changes were mixed throughout the report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.09 to a weekly average of $8.45/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.23 to a weekly average of $8.15/MMBtu. In the week last year corresponding to this week (week beginning March 8 and ending March 15, 2023), the prices were $14.22/MMBtu in East Asia and $14.57/MMBtu at the TTF.

World Markets

The European stock market inched upwards this week largely on robust corporate earnings and hopes that interest rates would come down soon. The pan-European STOXX Europe 600 Index went up by 0.31% in local currency terms, in effect realizing its eighth straight weekly gain. Major indexes in the region were up. France’s CAC 40 Index gained by 1.70%, Italy’s FTSE MIB put on 1.61%, and Germany’s DAX rose by 0.69%. The UK’s FTSE 100 Index advanced by 0.94%. Due to growing confidence in Italy’s economic policy and increased demand for high-yield debt ahead of a likely reduction in borrowing costs later this year, the yield spread between German and Italian benchmark 10-year sovereign bonds narrowed significantly. European policymakers debated whether an interest rate cut may be needed in June. The European Central Bank (ECB) has signaled its preference for rate cuts to happen by midyear. They see a potential for the ECB to reduce borrowing costs at every subsequent meeting this year. While the risk of service inflation may pick up, policymakers will likely focus on slowing wage growth.

Japanese equities experienced losses for the week, with the Nikkei 225 declining by 2.5% and the broad TOPIX Index descending by 2.1%. The announcement of the highest average wage rise for members of Japan’s labor unions since the early 1990s elevated the likelihood of the Bank of Japan (BoJ) ending its negative interest rate policy in the near term. The BoJ has anchored its stance on the view that monetary policy adjustments will rely on the meeting of its 2% inflation target. This, in turn, is driven by inflation accompanied by wage growth. The consensus expectations of economists are now converging around an interest rate hike to take place in March or April. The central bank’s ultra-accommodative policy has weighed heavily on the yen and, as a result, boosted many of the country’s large-cap exporters who derive their revenues from overseas. Over the week, the yen weakened to the high end of JPY 148 versus the dollar range, from about JPY 147 at the end of the previous week. The yield on the 10-year Japanese government bond rose to 0.79% from its previous level of 0.73%, reaching its highest level in approximately three months in anticipation of the BoJ adjusting its monetary policy settings.

The Chinese stock markets climbed in response to the government’s measures aimed at market stabilization, boosting investor confidence amid a weak economic outlook. The Shanghai Composite Index advanced by 0.28% while the blue-chip CSI 300 gained by 0.71% for the week. The Hong Kong benchmark Hang Seng Index rallied by 2.25%. Economic reports revealed that China’s consumer price index exceeded consensus by rising by 0.7% in February year-over-year, reversing its January decline of 0.8%. This marks the first positive reading since August 2023 as food and services prices increased and consumption surged during the weeklong Luna New Year holiday. On the other hand, the producer price index plunged by a larger-than-expected 2.7% from one year ago, accelerating from January’s 2.5% decline and marking the 17^th monthly decline. This is the longest streak of declines since 2016. As China grapples with weak domestic demand, investors remained cautious on perceiving that deflation has bottomed out.

The Week Ahead

February housing starts, initial jobless claims, and the FOMC meeting are among the important economic data scheduled for release in the coming week.

Key Topics to Watch

• Home builder confidence index for February
• Housing starts for February
• Building permits for February
• FOMC interest rate decision
• Fed Chair Powell press conference
• Initial jobless claims for March 15
• Philadelphia Fed manufacturing survey for March
• S&P flash U.S. services PMI for March
• S&P flash U.S. manufacturing PMI for March
• U.S. leading economic indicators for February
• Existing home sales for February

Markets Index Wrap-Up

Stock Markets

Major indexes ended slightly down this week. The Dow Jones Industrial Average (DJIA) shaved off 0.93% while the Dow Jones Total Stock Market dipped by 0.21%. The broad-based S&P 500 Index came down by 0.26% while the technology-tracking Nasdaq Stock Market Composite fell even further, losing by 1.17%. On the other hand, the NYSE Composite bucked the trend to close higher by 0.91%. Investor risk perception, as measured by the CBOE Volatility Index (VIX), climbed by 12.43% in reaction to increased uncertainties in the market.

The week began with a sell-off on Tuesday, as the S&P 500 fell by more than 1% for the first time since mid-February due to disappointing policy announcements from China. Stocks regained upward momentum by midweek, however, as the large-cap S&P 500 and the S&P MidCap 400 shot to new record intraday highs alongside the Nasdaq Composite this week. The strong surge was attributable to growing expectations that the Federal Reserve may begin to cut interest rates sooner than previously speculated. Small-cap and value shares outperformed. On the contrary, mega-cap shares lagged partly due to a decline in Apple following reports that iPhone sales were slowing in China. This was also the reason that Nasdaq underperformed the broader indexes. Despite this apparent breakout, most of the market reacted to higher-than-expected unemployment reports by the week’s end.

U.S. Economy

Over the week, some vital economic data weighed on the markets. Most notably, the U.S. unemployment rate was recorded at its highest level in two years. The U.S. nonfarm-jobs report was mixed but overall, it pointed to a cooling labor market. While the total jobs added in February totaled 275,000 which exceeded the targeted 200,000, the previous month’s reading was adjusted sharply lower, from 353,000 to 229,000. Also, the unemployment rate climbed from 3.7% to 3.9%, nearing its highest in two years. The nonfarm payrolls report revealed a weaker-than-forecast February ADP private-payrolls report. This revealed a total of 140,000 jobs added, which was short of the expected 150,000.

Another report released over the week was the ISM Manufacturing and Services data. These ISM data showed a sharp pullback in the employment indexes, indicating a contraction in the manufacturing and services sectors of the economy. The ISM data are comprehensive surveys of supply-management fundamentals and are taken by analysts to be leading indicators of the economy’s manufacturing and services industries. Regarding the manufacturing sector, this is the fifth consecutive monthly contraction of the ISM Employment index, with 10 industries reporting a decrease in employment and four industries reporting employment growth in February. The ISM Employment index in the services sector showed contraction for the second time in three months. Nine industries reported a decrease while six appointed an increase, and some indicated that they intend to increase hiring later in the year.

Metals and Minin

The precious metals markets, particularly regarding gold prices, surged to a new high this week. The underlying strength in gold is attributed to the anticipation of a Federal Reserve cut in interest rates by June. This past week, Fed Chair Jerome Powell hinted at the Central Bank’s possible rate reduction in the next few months, boosting market confidence and pushing gold to a new high of $2,152 in international markets on Wednesday. Speculation on the prospective rate cuts has sparked bullish sentiments in domestic and international markets, goading gold prices even higher after breaking out beyond its long-term resistance level.

The spot prices of precious metals rallied to record highs. Gold rose to $2,178.95 per troy ounce, which is 4.61% higher than last week’s close at $2,082.92. Silver closed at $24.31 per troy ounce,        5.15% over the closing price last week of $23.12. Platinum closed this week at $914.49 per troy ounce, rising 2.95% above the previous week’s close at $888.26. Palladium ended last week at $1,023.63 per troy ounce, gaining 6.85% above the previous week’s ending price of $958.04.  The three-month LME prices of base metals followed the same trend as precious metals. Copper, which closed the previous week at $8,493.50, ended this week at $8,640.50 per metric ton, gaining 1.73% for the week. Aluminum, which last traded at $2,228.00 the previous week, closed this week at $2,253.00 per metric ton for a gain of 1.12%. Zinc, which previously closed at $2,426.00, ended this week at $2,535.00 per metric ton for a rise of 4.49%. Tin, which was previously priced at $26,556.00, had a closing price this week of $27,607.00 per metric ton for a weekly gain of 3.96%.

Energy and Oil

Oil prices continued on their flatlining this week, unaffected by positive trade data out of China, and strong Indian oil demand. The continued build-up in U.S. crude inventories and the skepticism surrounding extended voluntary cuts by OPEC+ worked to offset what would have been the positive momentum in crude. February 7 marked the date when ICE Brent futures settled outside the $80-85 per barrel bandwidth for the last time. They suggest that the price movement this week marks a month-long sideways movement for oil. In the meantime, Red Sea hostilities claimed their first casualties as three sailors died in the Houthi’s attack on the Greek-owned Barbados-flagged dry bulk tanker True Confidence. The incident occurred some 50 nautical miles off the coast of Arden.  

Natural Gas

For the report week covering February 28 to March 6, 2024, the Henry Hub spot price climbed $0.03 from $1.63 per million British thermal units (MMBtu) to $1.66/MMBtu. Regarding the Henry Hub futures, the price of the April 2024 NYMEX contract increased by $0.044, from $1.885/MMBtu at the start of the report week to $1.929/MMBtu at the end of the week. The price of the 12-month strip averaging April 2024 through March 2025 futures contracts rose by $0.012 to $2.829/MMBtu.

International natural gas futures prices climbed this week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.10 to a weekly average of $8.36/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands rose by $0.74 to a weekly average of $8.38/MMBtu.  In the week last year corresponding to this week (the week from March 1 to March 8, 2023), the prices were $14.21/MMBtu in East Asia and $13.66/MMBtu at the TTF.

World Markets

European stocks were up this week as the pan-European STOXX Europe 600 Index climbed for the seventh consecutive week. The Index broke out to hit a record high on its way to a 1.14% gain for the week. The major indexes surged this week. Italy’s FTSE MIB added 1.43%, France’s CAC 40 Index gained 1.18%, and Germany’s DAX inched up by 0.45%. Bucking the trend was the UK’s FTSE 100 Index slid down by 0.30%. The ten-year government bond yields for Germany, Italy, and France declined in reaction to the European Central Bank (ECB) retaining its monetary policy unchanged and signaling that interest rates could be cut in June. The ECB revised its inflation and economic growth forecasts downward while leaving its key deposit rate unchanged at 4.0%. They also indicated that discussions have begun on dialing back restrictive policy later in the year. The ECB President Christine Lagarde stated that “good progress” has been realized toward the 2.0% inflation target, but also cautioned that the Governing Council still needed to confirm that the reduction in inflation was sustainable.

Japanese stocks ended mixed over the week. The Nikkei 225 Index closed 0.56% lower while the broader TOPIX Index gained 0.64%.  Artificial intelligence and solid corporate earnings drove some exuberance in the market and boosted investor confidence in the week. Speculation swirled around the Bank of Japan’s (BoJ’s) probable monetary policy trajectory. There are signs that the central bank is moving closer to raising short-term interest rates out of negative territory, about which policymakers appear to be gaining greater conviction than previously thought. A BoJ board member suggested that a virtuous cycle of prices rising in tandem with wages (a stated precondition for monetary policy tightening) was in sight. Against this development, the yield on the 10-year Japanese government bond rose to 0.73% from 0.71% at the end of the previous week. The strength of the yen weighs on Japan’s exporters as they realize significant dollar-denominated revenues. Over the past three years, Japanese stock markets have significantly gained on the back of the currency’s weakness.

Chinese stocks gained this week resulting from the government’s recent market stabilization measures. Despite an uncertain economic outlook, investor confidence was significantly lifted by the roll-out of the measures. The Shanghai Composite Index climbed by 0.63% while the blue-chip CSI 300 added 0.2%. The Hong Kong benchmark Hang Seng Index pulled back by 1.42%. At the National People’s Congress (NPC), China’s parliament which started on March 5 and will end March 11, Beijing set an economic growth target of around 5% for 2024. This target is the same as last year’s target when China’s economy officially rose by 5.2%. Analysts have expressed skepticism, however, that the country would find it difficult to match this growth rate, which benefitted from a post-lockdown rebound in early 2023. Beijing set the budget deficit at about the same target as last year, which was initially at 3% before it was subsequently raised to 3.8% to accommodate more borrowing. The government said that it would issue RMB 1 trillion in special ultra-long central government bonds to further support economic growth.

The Week

CPI and PPI inflation data for February and retail sales data are a few of the important economic data scheduled for release in the coming week.

Key Topics to Watch

• NFIB optimism index for February
• Consumer price index (CPI) for February
• Core CPI for February
• CPI year-over-year
• Core CPI year-over-year
• Monthly U.S. federal budget for February
• U.S. retail sales for February
• Retail sales minus autos for February
• Producer price index (PPI) for February
• Core PPI for February
• PPI year-over-year
• Core PPI year-over-year
• Initial jobless claims for March 8
• Business inventories off January
• Empire State manufacturing survey for March
• Import price index for February
• Import price index minus fuel for February
• Industrial production for February
• Capacity utilization for February
• Consumer sentiment (prelim) for March

Markets Index Wrap-Up

Stock Markets

Markets were generally up this week except for the Dow Jones Industrial Average (DJIA), which closed by a modest 0.11% lower this week from last week. The Total Stock Market Index, however, ended slightly higher by 1.13%. The broad-based S&P 500 Index gained 0.95% while the Nasdaq Stock Market Composite climbed by 1.74%, reflecting the outperformance of technology-oriented stocks. The NYSE Composite ended with a 0.64% gain with all Russell Indexes ending up for the week. Investor risk perception, as measured by the CBOE Volatility Index (VIX) came down by 4.65%. The Nasdaq Composite joined the S&P 500 in record territory for the first time in over two years, underscoring the equity markets’ increasing strength. February was a particularly strong month for the S&P 500 which marked its strongest beginning two months of the year since 2019, as observed by the Wall Street Journal. In terms of market sentiment, the defining event of the week appeared to be the release by the Commerce Department on Thursday of the core (less food and energy) personal consumption expenditures (PCE) price index, an indicator of inflation.

U.S. Economy

The PCE price index rose by 2.8% for the 12 months ended in January, which aligns with expectations. The Commerce Department’s report seems to calm investors’ worries surrounding the Labor Department’s earlier pronouncement that shows that core prices rose by 3.9%, above the expected 3,7%. The core PCE price index is generally acknowledged to be the preferred gauge of the Federal Reserve regarding overall inflation pressures. In other economic news, the gauge for manufacturing activity by the Institute for Supply Management (ISM) came in significantly below expectations, Starting from an 18-month high of 49.1 in January, the metric fell back to 47.8 in February, keeping in mind that readings below 50 indicate contraction while those above 50 indicate expansion. A more reassuring picture was provided by durable goods, though, rising 0.1% in the month when the defense and aircraft sectors, both volatile components, are excluded. Personal incomes for February surprised on the upside, jumping 1.0% which is the biggest monthly gain of the year. In reaction to the PCE data and ISM report, by the end of the week, the yield on the benchmark 10-year Treasury note fell to its lowest intraday level since February 13. Recall that yields and bond prices move in opposite directions. As yields decreased U.S. Treasuries also generated positive returns amid a healthy Treasury supply concession.

Metals and Mining

This week, the gold futures market ended the week at a record high. Gold rallied by more than 2% this week, despite elevated bond yields and persistent strength in the U.S. currency, suggesting that underlying demand remains strong despite the lure of alternative investments. Some analysts express uncertainty as to whether the current rally in gold prices is sustainable. Despite growing bullish sentiment in the market, the recent rally does not appear to have solid fundamental support, therefore cautious optimism is advised. Gold has been trading within a tight range for the past few months, thus it is not surprising to see an outsized move as the market was bound to release some pressure. The market has to see some material weakness in the U.S. dollar for gold to maintain its upward momentum.

The spot prices for precious metals ended the week mixed. Gold rose by 2.33%, from last week’s closing price of $2,035.40 to this week’s closing price of $2,082.92 per troy ounce. Silver gained 0.74% from its end last week at $22.95 to this week’s end at $23.12 per troy ounce. Platinum lost 1.51% from last week’s close at $901.91 to this week’s close at $888.26 per troy ounce. Palladium descended by 1.85% from its last trade last week at $976.13 to its last trade this week at $958.04 per troy ounce. The three-month LME prices of industrial metals were also mixed. Copper descended by 0.86% from its last price one week ago at $8,567.50 to its last price this week at $8,493.50 per metric ton. On the other hand, aluminum gained 2.20% from its closing price last week at $2,180.00 to its closing price this week at $2,228.00 per metric ton. Zinc rose by 0.87% this week, from $2,405.00 to $2,426.00 per metric ton. Tin also rose, this time by 0.66% from last week’s close at $26,382.00 to this week’s close at $26,556.00.

Energy and Oil

The trading patterns for crude failed to respond to diverging macroeconomic news as China and Europe continued to struggle with below-expectations manufacturing activity and the U.S. nears the point of first interest rate cuts. Brent maintained at a level around the $83 per barrel support throughout the week. Looking forward, the next expected price-moving catalyst in the oil markets will be OPEC+ announcing whether it will revise or extend its voluntary production cuts next week (although revisions will be highly unlikely at this point). In the meantime, the market, particularly Indian importers of thermal fuel, is broadly expected to reduce their purchases of Russian coal,  which is up by 20% year-on-year in 2023 at 10.06 million tons, after the US-sanctioned SUEK and Mechel, Russia’s top coal exporters.

Natural Gas

For the report week beginning Wednesday, February 21, and ending Wednesday, February 28, 2024, the Henry Hub spot price rose by $0.03 from $1.60 per million British thermal units (MMBtu) to $1.63/MMBtu. Regarding the Henry Hub futures price, the March 2024 NYMEX contract expired on Tuesday, Feb. 27, at $1.615/MMBtu, down by $0.16 from the start of the report week. The April 2024 NYMEX contract price increased to $1.885/MMBtu, up by $0.02 from the start to the end of the report week. The price of the 12-month strip averaging April 2024 through March 2025 futures contracts rose by $0.09 to $2.817/MMBtu.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia dropped by $0.39 to a weekly average of $8.26/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, descended by $0.11 to a weekly average of $7.64/MMBtu. In the week last year corresponding to this report week (beginning February 22 and ending March 1, 2023), the prices were $14.76/MMBtu in East Asia and $15.10/MMBtu at the TTF. 

World Markets

The European equity markets showed an underlying resilience, maintaining near their highs for the week despite the lack of buying momentum, keeping the pan-European STOXX Europe 600 Index little changed. Investors reassessed the magnitude and timing of interest rate cuts by the European Central Bank in 2024, due to sticky inflation data. The major stock indexes were mixed in the region. Germany’s DAX climbed by 1.81% and Italy’s FTSE MIB rose by 0.71%. France’s CAC 40 Index gave back 0.41%, and the UK’s FTSE 100 lost by 0.31%. As expected, European government bond yields ended broadly higher. Inflation remains a concern as both headline and core inflation readings slowed less than expected in February. In the eurozone, annual consumer price growth decelerated modestly to 2.6% while core inflation slowed to 3.1%, which disappointed as it remained above the consensus estimate of 2.9%. For February, the European Commission’s economic sentiment indicator unexpectedly fell to 95.4. Confidence remained broadly stable in the industrial sector amid weak production expectations and a likely bottoming out of a drop in new orders. Confidence worsened in the services sector, however, due to lower demand. In both goods and services, selling price expectations eased.

Japanese equities were strong this week as the Nikkei hovered at around new highs, gaining about 2.1%, to elevate February’s gains to about 10.0%. The TOPIX likewise gained ground, ending the week higher by 1.8%. The monetary policy of the Bank of Japan (BoJ) remained highly accommodative as BoJ Governor Kazuo Ueda emphasized that it was too soon to conclude that the central bank had achieved its 2% inflation target sustainably. Ueda, stressed that prices rising in tandem with wages was a precondition for the BoJ to change its current stance. Japan’s consumer inflation, as indicated by the core consumer price index (CPI), slowed to 2.0% year-on-year in January from December’s 2.3%. Regarding the nation’s currency, while the yen remained broadly unchanged for the week at about JPY 150.5 versus the U.S. dollar, historic weakness in the yen provided an advantage for share price gains, especially for Japan’s exporters due to increased revenues derived from overseas. The yield on the 10-year Japanese government bond moved only slightly this week, settling at about 0.71%.

In China, equities rose on expectations that Beijing may attempt to stimulate growth by boosting monetary easing measures.  The Shanghai Composite Index rose by 0.74% while the blue-chip CSI 300 gained by 1.38%. On the other hand, Hong Kong’s benchmark Hang Seng Index slid by 0.82%. February’s economic reports continued to portray a mixed outlook for the country/ The official manufacturing purchasing managers index (PMI) fell from January’s 49.2 rating to February’s 49,1, remaining below the 50-mark threshold delineating growth from contraction. The reduction was attributed to declines in production and exports. Seasonal factors likewise weighed in since factories were closed for the Luna New Year holiday from February 10 to February 19. The non-manufacturing PMI, on the contrary, rose to a better-than-expected 51.4 from 50.7 in January. By comparison, the private Caixin/S&P Global survey of manufacturing activity climbed up to 50.9 in February, marking its fourth month of expansion and coming in higher than expected.

The Week Ahead

The ISM services PMI, the nonfarm payrolls report, and factory orders for January are some of the important economic news scheduled to be released this week.

Key Topics to Watch

• Factory orders for January
• ISM services for February
• ADP employment for February
• Fed Chair Jerome Powell testifies to Congress (Wed., March 6)
• U.S. wholesale inventories for January
• Job openings for January
• San Francisco Fed President Mary Daly speaks
• Federal Reserve Beige Book
• Minneapolis Fed President Ned Kashkari speaks
• Initial jobless claims for March 2
• U.S. productivity (revision) for Q4
• U.S. trade balance for January
• Fed Chair Jerome Powell testifies to Congress (Thurs., March 7)
• Cleveland Fed President Loretta Mester speaks
• Consumer credit for January
• New York Fed President John Williams speaks
• U.S. nonfarm payrolls for February
• U.S. unemployment rate for February
• U.S. hourly wages for February
• Hourly wages year-over-year

Markets Index Wrap-Up

Stock Markets

All major stock indexes rose for this shortened trading week to recover the ground lost in last week’s slump. The Dow Jones Industrial Average (DJIA) gained by 1.30%, its transportation sector overperforming with a 1.87% gain compared with the total stock market index that advanced by 1.41%. The broad-based S&P 500 Index climbed by 1.66% and the technology-heavy Nasdaq Stock Market Composite realized a gain of 1.40%, suggesting strong buying across the board. The NYSE Composite went up by 1.19%. The CBOE Volatility Index (Vix) retracted by 3.44%, indicating a lower risk perception by investors.

Both the S&P 500 and the Nasdaq Composite Index hit new intraday highs during the week, with the latter posting its biggest daily gain in its year-to-date performance on Thursday. On that day, NVIDIA’s market capitalization added a record $277 billion. The chipmaker exceeded Wall Street estimates when it reported strong quarterly revenue and earnings the day after the runup. The company added to its full-year guidance on robust demand for its chips which are a main component in artificial intelligence applications. The stock rally sparked by NVIDIA’s strong earnings also appeared to be supportive of high-yield bonds, since a lack of sellers in the high yield bond market manifested a solid demand for new issues in the fixed-income markets.

U.S. Economy

Economic releases were light during the week, with most data aligning with expectations. The exceptions were the initial and continuing jobless claims, which both came in below consensus estimates and suggested that the labor market remained tight. In the week ended February 17, 201,000 new claims were filed on a seasonally adjusted basis indicating a decline of 12,000 against that of the preceding week. The number of continuing claims declined by 27,000 to 1.862 million. Also, this week, S&P Global released early estimates of its purchasing managers indexes (PMIs) for manufacturing and services. Business activity in the services sector slightly cooled with its PMI pulling back to 51.3 from 52.5 in January. On the other hand, manufacturing activity rose unexpectedly to 51.5, its highest level in 17 months, which was in part attributable to an increase in export orders. Both gauges remained above 50, the line dividing contraction from expansion with readings north of 50 indicating positive growth. Overall, the economic improvement, though falling short of heating up, does not call for the reversal of interest rates because of the higher-than-expected January inflation reading, coupled with the tight jobs market and the strength of the economy in the fourth quarter.

Metals and Mining

While gold prices continue to hold above the $2,000-per-ounce support level, the price action does not seem to inspire bullish momentum from investors. The tech sector continues to draw investor confidence away from gold, due to advances in Artificial Intelligence. The significant profits reported by AI chipmaker NVIDIA for the fourth quarter of 2023 drew investor interest this week. A report of $22.10 billion in revenues represented a year-on-year rise of 265%, surging net income by 769%. The numbers are drawing market interest away from gold and towards equities due to investors’ fear of missing out.  

The spot market for precious metals ended the week mixed. Gold closed this week at $2,035.40 per troy ounce, higher by 1.08% from last week’s close at $2,013.59. Silver ended this week at $22.95 per troy ounce, lower by 2.01% from last week’s ending price of $23.42. Platinum closed this week at $901.91 per troy ounce, a loss of 0.85%            from last week’s close at $909.63. Palladium ended this week at $976.13 per troy ounce, 2.60% higher than its previous week’s close at $951.37. The three-month LME prices for base metals were also mixed. Copper gained 3.05% from its previous close at $8,314.00 to its recent weekly close at $8,567.50 per metric ton. Aluminum, which closed last week at $2,224.50, lost 2.00% of this value to end this week at $2,180.00 per metric ton. Zinc gained 2.14% from its close last week at $2,354.50 to end this week at $2,405.00 per metric ton. Tin, which came from $27,293.00 last week, closed this week at $26,382.00 per metric ton for a decline of 3.34%.

Energy and Oil

There has been remarkable volatility in oil trading over the past weeks. Lately, Brent futures moved within a narrow bandwidth between $81 and $84 per barrel. The minor day-on-day moves in crude appear to be dominated by macro factors, responding to warnings by two Federal Reserve governors against interest rate cuts in the next two months. As a result, oil prices are bound to decline slightly towards the end of the week, as Brent is set to close the week at approximately $82 per barrel. In the global sphere, Iraq restarted the 310,000 barrel per day (b/d) Baiji refiner shut down in 2014, and Baghdad expects the plant to be running at 150,000 b/d soon. Furthermore, Venezuela makes its first-ever purchase of Russian crude oil in a sign of the country preparing for a potential snapback of U.S. sanctions in April.

Natural Gas

For the report week from Wednesday, February 14 to Wednesday, February 21, 2024, the Henry Hub spot price rose by $0.09 from $1.51 per million British thermal units (MMBtu) when the week began to $1.60/MMBtu at the end of the week. Regarding Henry Hub futures, the price of the March 2024 NYMEX contract increased by $0.164, from $1.609/MMBtu when the week began to $1.773/MMBtu when the week ended. The price of the 12-month strip averaging March 2024 through February 2025 futures contracts ascended by $0.191 to $2.608/MMBtu.

International natural gas futures prices descended for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.77 to a weekly average of $8.65/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, fell by $0.51 to a weekly average of $7.75/MMBtu. In the week last year corresponding to this report week (week from February 15 to February 22, 2023), the prices were $15.34/MMBtu in East Asia and $15.64/MMBtu at the TTF.

World Markets

European stocks jumped to record levels this past week. In local currency terms, the pan-European STOXX Europe 600 Index surged to end the week 1.15% higher on stellar quarterly results from NVIDIA. The chipmaker’s earnings report stoked a global rally and demand for technology stocks. Italy’s FTSE MIB gained 3.05%, France’s CAC 40 Index advanced 2.56%, and Germany’s DAX ascended 1.76%. The UK’s FTSE 100 Index was only slightly changed, reflecting a weakness in energy and mining stocks. European government bond yields climbed across the board as investors narrowed their bets on the likely number of interest rate cuts this year, in light of the stronger-than-expected purchasing managers’ surveys. Early PMI data for February indicates that the eurozone economy could be stabilizing on the back of a recovery in the services sector. The HCOB eurozone composite PMI for output was provisionally estimated to rise to 48.9 from January’s 47.9. The February figure is an eight-month high but remains in contraction territory.

Japanese equities trading ended on Thursday (the markets were closed on Friday due to the celebration of the Emperor’s Birthday).  During this shortened trading week, stocks ended at a new all-time high, with the Nikkei 225 Index breaking the previous record set in December 1989, more than three decades ago. The broader TOPIX likewise ended at its highest level since February 1999, as confidence was underpinned by both a return to steady growth and corporate profitability. It was not all plain sailing, however. What was originally a four-day losing streak was snapped by a Thursday rally ahead of the Emperor’s Birthday holiday. In the fixed-income market, 10-year Japanese government bond yields ended the week at 0.711%, slightly down from the previous Friday’s yield of 0.725%. Regarding Japan’s economy, core machinery orders climbed by a seasonally adjusted 2.7% in December from a contraction of 4.9% in November. Japanese export data was likewise strong as it rose to a record high in January, with an 11.9% increase and marking a second straight month of positive growth. Later in the month, however, data from Japan’s manufacturing sector was lower than expected. The PMI for the manufacturing sector came in at 47.2, down from 48.0 in January.

Chinese stocks rose after a week when trading was suspended in observance of the Lunar New Year. Equities rallied as hopes reignited for economic recovery after a week of holiday spending. The Shanghai Composite Index surged by 4.85% while the blue-chip CSI 300 gained by 3.71%. Meanwhile, the Hong Kong benchmark Hang Seng Index climbed by 2.36%. Over the weeklong Lunar New Year holiday, tourism revenue rose by 47% over the same period in 2023 and surpassed pre-pandemic levels. Domestic trips gained by 34% over that of last year, and international trips likewise increased. Average spending per trip, however, fell by 9.5% from 2019 before the pandemic, which indicates that consumers still have lingering concerns about the robustness of the economic recovery. It should be noted that this year’s holiday lasted for eight days, one day longer than the 2019 holiday.  Regarding the real property sector, new home prices in 70 cities fell by 0.3% sequentially in January. This marks the seventh monthly contraction, according to Bureau statistics.

The Week Ahead

PCE inflation data, GDP fourth quarter data, and the ISM manufacturing PMI are among the important economic data scheduled to be released in the coming week.

Key Topics to Watch\

• New home sales for January
• Durable goods orders for January
• Durable goods minus transportation for January
• S&P Case-Shiller home price index (20 cities)
• Consumer confidence for February
• GDP (first revision) for Q4
• Advanced U.S. trade balance in goods for January
• Advanced retail inventories for January
• Advanced wholesale inventories for January
• Atlanta Fed President Raphael Bostic speaks (Feb. 28)
• Initial jobless claims for Feb. 24
• Personal income (nominal) for January
• Personal spending (nominal) for January
• PCE index
• Core PCE index
• PCE (year-over-year)
• Core PCE (year-over-year)
• Chicago Business Barometer (PMI) for February
• Pending home sales for January
• Atlanta Fed President Raphael Bostic speaks (Feb. 29)
• Chicago Fed President Austan Goolsbee speaks
• Cleveland Fed President Loretta Mester speaks
• Kansas City Fed President Jeff Schmid speaks
• S&P U.S. manufacturing PMI (final) for February
• ISM manufacturing for February
• Construction spending for January
• Consumer sentiment (final) for February
• Dallas Fed President Lorie Logan speaks
• Fed Governor Chris Waller speaks
• Atlanta Fed President Raphael Bostic speaks (Mar. 1)
• San Francisco Fed President Mary Daly speaks

Markets Index Wrap-Up

Stock Markets

The major stock indexes went south this week, albeit modestly. The Dow Jones Industrial Average (DJIA) dipped by 0.11% while the DJ Total Stock Market Index fell slightly further, by 0.26%. The broad-based S&P 500 Index slipped by 0.42% while the technology-heavy Nasdaq Stock Market Composite fell a bit more, by 1.34%. The NYSE Composite bucked the trend and gained 0.77%. The CBOE Volatility Index (VIX), the metric for investor risk perception, rose by 10.13%. Some earnings reports that surprised on the upside provided some buying incentive, causing the equally weighted version of the S&P 500 Index to reach a record high on Thursday. The investors’ sell-out was due to negative developments in the macroeconomic news of the week. The declines were concentrated in large-cap growth stocks, since the small-cap Russell 2000 Index rebounded to register gains by the week’s end.

The slump in stocks can be attributed to the inflation report that came out this week. January’s Consumer Price Index (CPI) and Producer Price Index (PPI) inflation reports that were released this week were higher than expected. Stocks dropped sharply when the inflation reports were released on Tuesday but recovered before trading ended to close only marginally lower. Although the reports were disappointing, it is too soon to conclude that the trend of descending inflation has reversed and it will soon trend higher. But grounds are likely eroding for expectations that the Federal Reserve interest rate cuts will be coming sooner than later. A trend towards rising inflation is just not justifiably sustainable at present.  

U.S. Economy

The higher inflation readings are the results of certain components in the CPI basket. Consumer prices rose 0.3% in January, higher than the consensus expectation of 0.2%. More worrisome is the rise in core consumer prices which hit 0.4%. This kept the year-over-year inflation at 3.9%, almost double the Federal Reserve’s target of 2%. Producer prices, which are usually more volatile than consumer prices, increased by 0.3% in January, the most in five months and higher than December’s reading of 0.1%. The main contributor was a 2.2% increase in the cost of hospital outpatient care.

Inflation was more moderate in energy and energy services, commodities, and used car and truck pricing. Nevertheless, food and food away from home (such as in restaurants) climbed higher, together with motor vehicle insurance. The most critical components that moved up were shelter and rent, which account for almost one-third of the CPI basket. These components were higher than expected, registering an increase of 6% annually. However, they often lag behind current developments in the housing and rental markets nationwide. Over the past year, real-time data suggests that these components are likely to cool in the coming months. CPI is expected to fall to approximately 2.5% over the coming year. If this materializes, it is good news because not only does it tend to provide support for consumers, but it also gives the Fed a reason to at last consider cutting interest rates.  

The week also brought news of slowing economic growth, which, while concerning, nevertheless eased fears of a resurging inflation rate. The Commerce Department on Thursday reported that retail sales fell in January by 0.8%. Some economists cited seasonal factors and harsher weather conditions in January, but other weather-sensitive sales at restaurants and bars surprisingly increased by 0.7%. Continuing claims were slightly above expectations although initial jobless claims were slightly below consensus. Housing starts that came out on Friday were lower than expected, but a gauge of homebuilder confidence trended surprisingly higher.

Metals and Mining

Due to the sentiment that the Fed is still a long distance from its inflation target of 2%, gold and silver prices fell to their lowest in months, and now are testing their supports at $2,000 and $22 per ounce respectively. Investors are selling off from the gold market, due to higher-for-longer interest rates supporting higher bond yields and a stronger U.S. dollar. Investors continue to push equities to record highs rather than remain in the gold market. So far this year, more than $3 billion has exited the global gold-backed exchange traded products, while the newly approved Bitcoin ETFs have experienced total inflows of $4.115 billion. Nevertheless, there is underlying strength in the precious metals market, as they have so far held at their critical support levels despite strong selling pressure.

This week, the spot market for precious metals was mixed. Gold lost by 0.53% from its close last week at $2,024.26 to its close this week at $2,013.59 per troy ounce. Silver gained by 3.58% from its closing price last week of $22.61 to its closing price this week of $23.42 per troy ounce. Platinum, which ended this week at $909.63 per troy ounce, climbed by 3.72% from last week’s close at $877.04. Palladium, closing this week at $951.37 per troy ounce, appreciated by 10.39% from its closing price last week at $861.86. The three-month LME prices of industrial metals generally rose this week. Copper, the price of which was $8,193.50 last week, climbed by 1.47% to settle this week at $8,314.00 per metric ton. Zinc gained 1.16% for the week, beginning at last week’s closing price of $2,327.50 to end at $2,354.50 per metric ton this week. Aluminum, which was priced at $2,221.50 last week, climbed by 0.14% to end this week at $2,224.50 per metric ton. Tin ended at $27,293.00 per metric ton this week, up by 5.40% from last week’s close at $25,895.00.     

Energy and Oil

This week oil prices continued its sideways trek of the past weeks. Some bullish activity from weak U.S. retail sales was rapidly curtailed by a fresh escalation of the Middle East political unrest as Israel attacked Rafah, potentially prompting a Houthi retaliation soon. Speculation is growing that production cuts by OPEC+ in 2024 appear to be ignored by the members of the oil group. If there is any truth to this narrative, the impact has still to become evident in Brent’s price which currently remains at $82 per barrel. In any case, the Iraqi oil ministry confirmed that over the next four months, it would compensate for its January increase in crude production. OPEC’s secondary sources estimate Iraq’s output at 4.19 million barrels per day (b/d), which is about 190,000 b/d above target

Natural Gas

For the report week covering Wednesday, February 7, to Wednesday, February 14, 2024, the Henry Hub spot price fell by $0.46 from $1.97 per million British thermal units (MMBtu) to $1.51/MMBtu throughout the week. The Henry Hub spot price averaged $1.88/MMBtu so far this month, the lowest inflation-adjusted monthly average since at least January 2000, according to data from Natural Gas Intelligence. Regarding the Henry Hub futures, the price of the March 2024 NYMEX contract decreased by $0.358, from $1.967/MMBtu at the start of the report week to $1.609/MMBtu at the end of the week. The price of the 12-month strip averaging March 2024 through February 2025 futures contracts declined by $0.224 to $2.417/MMBtu.

International natural gas futures prices decreased during this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia declined by $0.04 to a weekly average of $9.42/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, also declined, by $0.81 to a weekly average of $8.26/MMBtu. In the week last year that corresponds to this report week (week from February 8 to February 15, 2023), the prices were $17.91/MMBtu and $16.68/MMBtu in East Asia and at the TTF, respectively.

World Markets

European stocks advanced for the week as the pan-European STOXX Europe 600 Index gained 1.39% in local currency terms. The improved investor sentiment is due to signs of cooling inflation and optimism regarding the possibility of interest rate cuts. Italy’s FTSE MIB outshined, rising by 1.85%, while France’s CAC 40 Index hit new highs during the week and closed on Friday higher by 1.58% week-over-week. Germany’s DAX also impressed, gaining by 1.13% for the week. The UK’s FTSE 100 rose by 1.84% for the week. Core eurozone government bond yields recorded modest gains in response to reports that the U.S. announced higher-than-expected inflation readings. European Central Bank (ECB) officials cautioned against “making a hasty decision,” in the words of ECB President Christine Lagarde, in hastily crafting policy decisions just in case inflation reverses course and heads up again. In the meantime, official UK economic data places the country in recession territory in the final three months of 2023, and that inflation held steady in January, furthering market expectations that the Bank of England (BoE) may cut interest rates by June.  

Japan’s equities markets climbed during the week. The Nikkei 225 Index gained by 4.3% while the broader TOPIX Index rose by 2.6%. The Nikkei continued its strong performance in the year-to-date period and the year 2023, now holding around its highest level in 34 years. Positive corporate earnings releases and the continued weakness in the yen provided support to the rally. Regarding economic performance, Japan’s weak fourth-quarter growth data fostered some uncertainty regarding the future direction of the Bank of Japan’s monetary policy, which the BoE anchored on sustainability in achieving its 2% inflation target. The yield on the 10-year Japanese government bond closed the week mostly unchanged at 0.73%. Investors factored in the most recent U.S. economic data, including its inflation reports, and the possible impacts they may have on the timing of future Federal Reserve rate cuts. The yen weakened to the low JPY 150 range from the low JPY 149 range at the end of the previous week. The weak yen has redounded to a competitive advantage for Japanese exporters because it increases the domestic value of their overseas revenues.

China’s financial markets were closed for the week in observance of the weeklong Lunar New Year holiday that commenced on Saturday, February 10. There was a pickup in consumer spending over the Lunar New Year, China’s most important holiday, as indicated by early data. During the first six days of the national holiday, more than 61 million rail trips were made. This is a 61% jump over comparative figures last year, according to official media reports. State media reported that hotel sales on China’s e-commerce platforms increased by more than 60% while travel by road and airplane likewise improved. Analysts were quick to caution, however, that the year-over-year consumption figures may be misleading, given that China was in the throes of a coronavirus outbreak in early 2023 which caused Beijing to roll back pandemic restrictions in December 2022.

The Week Ahead

The January FOMC minutes and the S&P Global PMI data are among the important economic data scheduled for release in the coming week.

Key Topics to Watch

• U.S. leading economic indicators
• Atlanta Fed President Raphael Bostic delivers welcome remarks
• Fed Gov. Michelle Bowman speaks
• Minutes of Fed’s January FOMC meeting
• Initial jobless claims for Feb. 17
• S&P flash U.S. services PMI for February
• S&P flash U.S. manufacturing PMI for February
• Existing home sales for January
• Fed Vice Chair Philip Jefferson speaks
• Philadelphia Fed President Patrick Harker speaks
• Fed Gov. Lisa Cook speaks
• Minneapolis Fed President Neel Kashkari speaks
• Fed Gov. Christopher Waller speaks

Markets Index Wrap-Up

Stock Markets

Markets continued to trek upward this week into record-breaking territory although the advance was narrow. The Dow Jones Industrial Average (DJIA) gained 0.04% week-on-week while the DJ Total Stock Market Index climbed by 1.51%. The technology-heavy Nasdaq Stock Market Composite gained 2.31% while the NYSE Composite rose by 1.02%. CBOE Volatility Index, the risk perception indicator, fell by 6.64% for the week. The big news, however, surrounded the meteoric rise of the S&P 500 Index which gained 1.35% but, in doing so, broke and held above the 5,000 long-term resistance level for the first time. The index traded at a high of 5.030.06 and a low of 5,000.34 for the week, closing on Friday at 5,026.61.

The continued market gains were heartening although the narrow climb may be a sign that this rally will not last. The equally weighted version of the S&P 500 Index significantly lags behind the standard market-weighted version for the fourth time in five weeks, suggesting that not all the counters are seeing new gains. There is also a downward trend in the number of stocks remaining above their 50-day moving averages. This is not necessarily an omen of bad fortune ahead, as the lack of buying interest may simply be the result of the lack of fresh economic data that would move the markets, so investors are focusing on individual companies’ earnings reports for buying motivation. Nevertheless, it would not be out of the ordinary if, after breaking into new highs, the market may come down to consolidate before it rallies again.

U.S. Economy

The economic surprises this week came from S&P Global’s assessment of the services sector activity. The services sector remains in remarkably good shape, jumping unexpectedly to a four-month high back into expansion territory, from December’s 50.5 to a solid 53.4 in January (readings above 50 signal expansion, below 50 indicate contraction). The counterpart metric of the Institute of Supply Management likewise indicated solid growth at 55.8, however, its measure of prices paid for services climbed to its highest level in almost a year. This reading sharply contrasted with recent data on prices paid by manufacturers, which have signaled falling prices for many inputs. The Labor Department on Friday lowered its initial estimate of December consumer inflation, from 0.3% to 0.2%.

In the assessment of many analysts, a hard recession appears to be increasingly unlikely as the Fed gradually shifts policies from hawkish to dovish, The worst-case scenario for the economy is dimming, but that does not completely discount the chances of even a mild recession or soft landing. A lower percentage of banks reported a tightening of credit conditions in the latest Senior Loan Officer Opinion Survey (SLOOS) released last week, which may suggest that a possible bottoming out in the credit cycle is imminent or has been passed. Although consumer spending will likely slow down, other economic sectors may be gaining momentum to provide an offset in the last semester of this year.

Metals and Mining

This week, gold prices continued to consolidate in a tight band between $2,000 and $2,050 per ounce. Nevertheless, consultants have confirmed that there remains pent-up demand for the precious metal, thus keeping the market for gold robust even if prices do not appear to have any strong bullish momentum. The volume of sales continues to be impressive in the present price environment, even if volumes do not meet the levels they were at last year. Analysts further note that Asian investors are buying precious metals, not only because of the Lunar New Year but to preserve their wealth in light of the uncertainty in the equity markets which may turn volatile.

This week, precious metals were mostly down. Gold lost by 0.76% from last week’s closing price of $2,039.76 to close this week at $2,024.26 per troy ounce. Silver fell by 0.35% from last week’s closing price of $22.69 to end this week at $22.61 per troy ounce. Platinum lost by 2.22% from its closing price one week ago at $896.95 to its closing price this week of $877.04 per troy ounce. Palladium ended this week at $861.86 per troy ounce, 9.17% lower than last week’s closing price of $948.92. The three-month LME prices of base metals went mostly in the same direction, Copper closed this week at $8,193.50 per metric ton, 3.40% lower than last week’s close of $8,482.00. Zinc ended the week at $2,327.50 per metric ton, down by 5.04% from its last traded price the week before at $2,451.00. Aluminum finished this week at $2,221.50 per metric ton, lower by 0.54% from last week’s close of $2,233.50. Tin bucked the trend when it closed at $25,895.00 per metric ton this week, gaining 1.35% from last week’s closing price of $25,550.00.              

Energy and Oil

This week, the geopolitical risk premium rose significantly after Israel turned down a ceasefire offer in Gaza and bombed the border city of Rafah. This development makes it increasingly improbable that any de-escalation of tensions in Gaza may materialize in the upcoming weeks. Oil prices have been further buoyed by relatively bearish calls from the U.S. Energy Information Administration pronouncing that U.S. crude output is unlikely to exceed the current level of 13.3 million barrels per day (b/d) until early 2025. Brent is poised to end the week slightly below $82 per barrel.

Natural Gas

For the report week beginning Wednesday, January 31, and ending Wednesday, February 7, 2024, the Henry Hub spot price fell by $0.26 from $2.23 per million British thermal units (MMBtu) to $1.97/MMBtu, the lowest price since June 12, 2023. Regarding the Henry Hub futures price, the price of the March 2024 NYMEX contract decreased by $0.133, from $2.100/MMBtu at the start of the report week to $1.967/MMBtu at the week’s end. This is the lowest settlement price for the March 2024 contract since trading of this contract began 12 years ago. The price of the 12-month strip, averaging March 2024 through February 2025 futures contracts, declined by $0.125 to $2.641/MMBtu.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia rose by $0.04 to a weekly average of $9.46/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, fell by $0.06 to a weekly average of $9.07/MMBtu. The week last year corresponding to this report week (the week from February 1 to February 8, 2023), the prices were $18.30/MMBtu in East Asia and $17.83/MMBtu at the TTF. The last time early February prices at the TTF averaged below $10/MMBtu was in 2021.

World Market

The pan-European STOXX Europe 600 Index closed with a 0.19% gain on the back of the strong earnings reports of some companies. Gains were curbed, however, by the persistent concern that interest rates may stay higher for longer. Germany’s DAX hardly changed although it remained close to its record high. France’s CAC 40 Index gained by 0.73% while Italy’s FTSE MIB outperformed with a gain of 1,43%. The UK’s FTSE 100 Index lost by 0.56%. Prominent officials of the European Central Bank (ECB) continued to issue warnings against prematurely cutting interest rates. There continue to remain conditions that threaten efforts at inflation control such as sticky services prices, a resilient labor market, and attacks on vessels in the Red Sea that tend to disrupt supply chains. Policymakers want more evidence to support confidence that inflation will eventually settle at the ECB’s target 2% inflation rate.

Over the week, Japan’s stock markets rallied, with the Nikkei 225 Index advancing by 2% and the broader TOPIX rising by 0.7%. The Nikkei reached a 34-year high due to currency weakness that prompted some profit-taking. Gains were also limited as a result of a pullback in expectations that the U.S. Federal Reserve would cut interest rates as early as March. Supportive of investor sentiment, however, were reports of strong foreign investor interest in Japanese stocks in January prompted by a solid earnings reports season. Also driving investor confidence was the recent signal of the Bank of Japan (BoJ) monetary policy continuity even after it exited from its negative interest rate regime. The yield on the 10-year Japanese government bond rose to 0.72% from 0.68% at the end of the previous week as BoJ provided assurances that financial conditions would remain accommodative. These dovish remarks caused the yen to weaken from JPY 148 last week to JPY 149 against the U.S. dollar this week.

During a holiday-shortened week, Chinese stocks rallied in response to the government’s latest series of stimulus measures released to allay concerns about deepening deflation. The Shanghai Composite Index gained by 4.97% and the blue-chip CSI 300 advanced by 5.83% for the four-day trading week. Markets in mainland China remained closed for the Lunar New Year holiday on Friday, February 9, and will continue to remain closed for the next week. Trading at the exchanges will resume on Monday, February 19. The Hong Kong benchmark Hang Seng Index rose by 1.37% for the week. China’s consumer price index fell by 0.8% in January from the prior year period. This is an acceleration from the CPI’s 0.3% drop in December and marks its fastest decline since 2009. Leaning the contraction are food prices, particularly that of pork. Core inflation (which excludes volatile components food and energy costs) rose by 0.4%, its weakest rise since June 2023. The producer price index slipped by 2.5% year-on-year, marking the 16^th consecutive month of deflation for factory gate costs. 

The Week Ahead

Among the important economic data scheduled to be released this week are the January housing starts and building permits, the CPI inflation data, and retail sales data.

Key Topics to Watch

• Monthly U.S. Federal Budget for January
• Consumer price index for January
• Core CPI for January
• CPI year-over-year
• Core CPI year-over-year
• Initial jobless claims for February 3
• Empire State manufacturing survey for February
• Philadelphia Fed manufacturing survey for February
• Import price index for January
• Import price index minus fuel for January
• U.S. retail sales for January
• Retail sales minus autos for January
• Industrial production for January
• Capacity utilization for January
• Home builder confidence index for February
• Housing starts for January
• Building permits for January
• Producer price index for January
• Core PPI for January
• PPI year-over-year
• Core PPI year-over-year
• Consumer sentiment (prelim) for February

Markets Index Wrap-Up

Stock Markets

Amid a profusion of significant earnings reports and economic data, the stocks responded with mixed reactions. All major indexes were modestly up for the week but small-cap indexes recorded losses. According to the Wall Street Journal Markets monitor, the Dow Jones Industrial Average gained by 1.43% while the Total Stock Market Index advanced by 1.22%. The broad-based S&P 500 Index climbed by 1.38% but its equally weighted version closed with a moderate loss. The technology-heavy Nasdaq Stock Market Composite moved up by 1.12%, and the NYSE Composite marginally gained by 0.90%. The CBOE Volatility Index, a measure of investors’ risk perception, moved up by 4.45%. Over the past month, the small-cap Russell 2000 Index declined by nearly 4.0%.

Several releases from tech heavyweights drove movements in the major indexes during this, the busiest week of the fourth-quarter earnings reporting season. In response to lower-than-expected earnings guidance from Google parent Alphabet, Microsoft, and chipmaker Advanced Micro Devices, the Nasdaq Composite Index and the S&P 500 Index plunged precipitously on Wednesday. On Thursday, however, the benchmarks recovered much of their losses, buoyed by the stronger-than-anticipated earnings reports from Facebook parent Meta Platforms, Apple, and Amazon.com. Also seeming to sway sentiment was the Federal Reserve policy meeting that concluded on Wednesday. Short-term interest rates were left unchanged by the policy-making body, which broadly aligned with expectations. However, Fed Chair Jerome Powell stated that the Fed was unlikely to cut rates in March, which resulted in futures markets pricing in only 20.5% (from 47.7% one week earlier) of a rate cut at the Fed’s next policy meeting.

U.S. Economy

On Friday, the Labor Department reported that employers added 353.000 new nonfarm jobs in January, double the consensus estimates, at the same time adjusting even higher the gains made in November and December due in part to an annual benchmark revision.  The strong employment report weakened the chances that the Fed will cut interest rates soon, Also surprising on the upside were average hourly earnings which rose by 0.6% and brought the year-over-year increase to 4.6%. Unemployment remained unchanged at 3.7%. However, the average workweek unexpectedly contracted from 34.3 to 34.1 hours. The data was consistent with an upside surprise in job openings reported earlier in the week. December’s job openings rose to their highest level in three months, at 9.03 million.

Some reassuring news on the struggling manufacturing sector also emerged this week.  Revisions to the January gauges of factor activity for both S&P Global and the Institute for Supply Management were released on Wednesday, beating expectations with the former indicating the best (but still moderate) pace of growth in the sector since September 2022. The yield on the benchmark 10-year U.S. Treasury note rose in reaction to Friday’s jobs report but still ended lower for the week. Aside from the modest upside surprise in weekly jobless claims, also possibly exerting some limiting pressure on yields is the lower-than-expected borrowing needs figures reported by the Treasury Department on Tuesday. Furthermore, a relatively light primary calendar and positive flows over the week benefitted the tax-free municipal market.

Metals and Mining

This week, gold and silver continued to defy the odds as they followed the price action pattern established in 2023 that has propelled their prices to record highs. Gold has managed to hold critical support levels, consolidating within a broad-based uptrend despite the Federal Reserve maintaining a restrictive monetary policy that holds the Fed Funds rate at its highest level in nearly two decades. This week, investors received the Fed’s message that the anticipated rate cuts are not going to take place just yet. Despite significant headwinds for metals – the reduced expectations of a rate cut and the S&P 500 and DJIA treading new highs – the April gold futures and rending the week with a close to 1% gain and prices testing resistance around $2,050 per ounce. This shows that there is strength in the physical demand for gold in the marketplace.    

The spot prices for precious metals were mixed for the week. Gold gained 1.05% from its close the previous week at $2,018.52 to its close this week at $2,039.76 per troy ounce. Silver ended lower by 0.48% from its closing price last week of $22.80 to its closing price this week of $22.69 per troy ounce. Platinum ended this week lower by 2.05%, from its price last week of $915.68 to its closing price this week of $896.95 per troy ounce. Palladium ended down by 1.19% from last week’s close at $960.31 to this week’s close at $948.92 per troy ounce. The three-month LME prices of industrial metals were mostly down for the week. Copper came from $8,568.50 last week to $8,482.00 per metric ton this week for a loss of 1.01%.  Zinc began from its closing price last week of $2,580.00 to its closing price this week of $2,451.00 per metric ton for a decline of 5.00%. Aluminum came from its close last week at $2,238.50 to end this week at $2,233.50 per metric ton for a reduction of 0.22%. Tin, which closed last week at $26,648.00, ended this week at $25,550.00 per metric ton for a loss of 4.12%.

Energy and Oil

Market fundamentals took a back seat to speculation this week as oil prices were weighed down by unsubstantiated reports of an impending ceasefire between Israel and Palestine. Brent futures were dragged below $80 per barrel in response to the rumors. Regarding fundamentals, OPEC+ held its ministerial meeting and announced that it was retaining its policy of making no changes to its production policy. Participating top officials indicated that they will meet once more in early March to decide on an extension of the 2.2 million barrels-per-day cuts into the second quarter. With this as background, unforeseen refinery outages in the United States may weaken the U.S. demand further and thus have an even more lasting impact on prices.  

Natural Gas

For the report week from Wednesday, January 24, to Wednesday, January 31, 2024, the Henry Hub spot price fell by $0.21 from $2.44 per million British thermal units (MMBtu) to $2.23/MMBtu. Regarding Henry Hub futures prices, the February 2024 NYMEX contract expired on Monday at $2.490/MMBtu, down by $0.15 from the beginning of the report week. The March 2024 NYMEX contract price decreased to $2.100 /MMBtu, down by $0.16 from the start to the end of the report week. The front-month futures contract price fell after rising above $3.00/MMBtu in the middle of January. The price of the 12-month strip averaging March 2024 through February 2025 futures contracts declined by $0.14 to $2.767/MMBtu.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.07 to a weekly average of $9.42/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.22 to a weekly average of $9.13/MMBtu. In the week last year corresponding to this report week (the week from January 15 to February 1, 2023), the prices were $19.43/MMBtu in East Asia and $18.04/MMBtu at the TTF.

World Markets

European stocks were directionless this week resulting in the pan-European STOXX 600 Index ending the week roughly flat. Major stock indexes were mixed. While Italy’s FTSE MIB gained 1.11%, France’s CAC 40 Index declined by 0.55%, Germany’s DAX slipped downward by 0.25%, and the UK’s FTSE 100 Index dipped by 0.26%. The yield on the benchmark 10-year German government bond approached a three-week low but returned to end the week unchanged. The UK and Italian government bond yields also dived during the week before recovering lost ground on Friday to end the week slightly higher. On the economic front, the eurozone surprisingly avoided a recession in the last quarter of 2023. During the period, the gross domestic product (GDP) was unchanged relative to the previous three months and was 0.1% higher year-over-year. Annual consumer price inflation continued to proceed in the right direction as the headline rate slowed to 2.8% in January from 2.9% in December. The core inflation rate (excluding the volatile components – food, energy, alcohol, and tobacco prices) likewise inched lower to 3.3%.

Japanese stock markets ascended this past week. The Nikkei 225 Index gained by 1.1% while the broader TOPIX Index rose by 1.7%, mostly due to support lent by a robust corporate earnings season. Higher prices and strong tourism provided a boost to domestically focused firms. The 10-year Japanese government bond (JGB) yield dropped to 0.68% from 0.71% at the end of the previous week. Exerting downward pressure on yields was a surprisingly strong 10-year JGB auction. Regarding currency markets, the yen strengthened to around the high-146 range from the previous low-148 range against the U.S. dollar as the U.S. Federal Reserve dispelled expectations of an interest rate cut in March. Underpinning the yen’s gains are some signs of a hawkish stance by the Bank of Japan (BoJ). On the country’s economy, Purchasing Managers’ Index (PMI) data showed that Japanese manufacturing conditions deteriorated modestly in January, with continued falls in output and new orders. Over the month, managers also faced a steep rise in price pressures as cost burdens rose at a marked pace amid high raw materials, labor, and fuel prices.

In China, stocks retreated in the face of discouraging economic data and property sector headlines, fueling investors’ pessimism surrounding the growth outlook. The Shanghai Composite Index saw its worst week since 2018 as it plummeted by 6.19%. The blue-chip CSI 300 plunged by 4.63%, its biggest weekly loss since 2022. Both indexes are trading at their lowest levels in five years. The Hong Kong benchmark Hang Seng Index declined by 2.62%. A mixed picture of China’s economy was reflected in January’s economic data. The official Manufacturing Purchasing Managers’ Index (PMI) ascended to 49.2 in January from 49,0 in December amid improved production growth. However, this figure still lagged the 50-mark threshold that distinguished expansion from contraction. The non-manufacturing PMI is well into expansion territory as it registered an above-consensus 50.7 from 50.4 in December. By comparison, the private Caixin/S&P Global Survey of manufacturing activity held steady at 50.8 in January, exceeding expectations and marking its third straight month of expansion. Meanwhile, the value of new home sales by China’s top 100 developers fell by 34.2% year-on-year in January. This is roughly even with the 34.6% drop in December, according to the China Real Estate Corporation. The report shows no sign of improvement in China’s property crisis. Falling home prices and construction delays continue to sideline buyers, in turn increasing pressure on indebted property developers and leading Beijing to intervene to prop up the sector.        

The Week Ahead

Included among the important economic data scheduled for release in the coming week are the ISM service PMI reading, consumer credit data, and the U.S. trade deficit.

Key Topics to Watch

• S&P Final U.S. services PMI for January
• Chicago Fed President Austan Goolsbee TV appearance
• ISM services for January
• Atlanta Fed President Raphael Bostic gives welcoming remarks
• Cleveland Fed President Loretta Mester speaks
• Minneapolis Fed President Neel Kashkari speaks
• Boston Fed President Susan Collins speaks (Tuesday, Feb, 6)
• Philadelphia Fed President Patrick Harker speaks
• U.S. Trade deficit for December
• Fed Gov. Adriana Kugler speaks
• Boston Fed President Susan Collins speaks (Wednesday, Feb. 7)
• Richmond Fed President Tom Barkin speaks (Wednesday, Feb. 7)
• Fed Gov. Michelle Bowman speaks
• Consumer credit for January
• CBO briefing on budget and economic outlook
• Initial jobless claims for February 3
• Wholesale inventories for December
• Richmond Fed President Tom Barkin speaks (Thursday, Feb. 8)
• CPI seasonal factor revisions
• Dallas Fed President Lorie Logan speaks

Markets Index Wrap-Up