Macro-News round-up:

MarketNews

Macro-News round-up:
#MarketNews

– US: Yesterday, the US stock markets started the session in positive territory but ended up closing practically unchanged. The possibility of a rate cut in March seems to have been ruled out, the market is discounting it at 36.4% after the words of Waller and Bostic from the Federal Reserve, last week. This is being reflected in the bond market with yields slowly but surely rising. The 2 year bond yield rose 5 basis points to 4.38% and the 10 year bond yield rose a similar amount to 4.176%.

Despite the increase in US bond yields, and above all, despite the dismal PMI results in Europe, confirming a more than evident contraction of its economy, the EURUSD rallied again during yesterday’s session, trading above 1.09 for a few hours, but losing those levels again at the close of Wall Street.  It is currently trading below its 200 and 55 period averages on H4 candlesticks.

Today, the US will provides its preliminary estimate for GDP in 4Q23, which is anticipated to decrease from 4.9% in 3Q23 to 2.0% on an annualised basis. The economic releases for the day conclude with weekly jobless claims.

– Europe: Even though the ECB is not cutting rates today, despite dismal economic growth and a rapid slowdown in inflation, the news conference will continue to be closely watched for clues about when the first cut may occur. September marked the conclusion of the ECB’s fastest rate-hiking cycle, but they have insisted that it would be premature to even talk a reversal.

The current quarter marks the sixth consecutive quarter with essentially flat or negative growth, given the euro zone was likely in recession the previous quarter and had a poor start in January. The inflation drop that we are experiencing, will mean rising real interest rates, effectively policy tightening in a recessionary environment.

“This would raise the risk of an outright recession and a genuine shock to the labour market” Deutsche Bank added on a Reuters article about this. There are others who believe that the probability of a policy error is increased by the ECB’s emphasis on further proof of disinflation.

For the moment, European stock markets are retreating slightly from the incomprehensible rise we saw yesterday after the bad macro data. DAX40 is at around 16,840 points, failing in its apparent attempt to get back to 17,000.

– China: The Reserve Bank of China (PBOC) declared that as on February 5, the RRR would be lowered by 50 basis points.  The 50bp RRR drop was the biggest since December 2021 and was greater than the 25bp cuts that the PBOC decided to implement in 2022–2023. Furthermore, the PBOC expanded the real estate promoters’ access to commercial loans by allowing bank loans secured against the promoters’ commercial properties to be used as collateral for loans and bonuses up until year-end.

The Chinese mainland stock markets seem to have received the news positively, which we warned you about yesterday. During the last trading day, the Hang Seng index rose by 3.56%, while the CSI 300 gained 1.4%.


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