Macro-News round-up:
#MarketNews

Yesterday, the revised US GDP growth for the fourth quarter of 2023 came in at 3.2%, down from the initial release’s 3.3% growth rate. 

Although the change is not very significant, the expectation is that this will improve general stock market conditions. The reason is that any data showing some weakness in the US economy will facilitate the Fed’s rate cut decision, which has been postponed since March, to possibly July. However, yesterday, the NASDAQ dropped by 0.55% while the S&P 500 dropped by 0.17%. 

The PCE data to be released today by the United States will undoubtedly be one of the key data. It will show whether the upturn in inflation that was published two weeks ago has been confirmed or, on the contrary, rectified. It will show whether the upturn in inflation that was published two weeks ago has been confirmed or, on the contrary, rectified.

This will possibly fulfil the bullish pattern we detected and shared a few days ago, where we would project the DXY towards 107 or 107.50 points zone. This could trigger a bearish continuation in the EURUSD pair that would continue to push it towards areas close to 1.05.

In such a scenario, we do not expect equities to respond positively, but rather a correction and falls in the markets, as with such data on inflation rallies, doubts about whether to cut interest rates at the Federal Reserve will be increased.

In such a scenario, we do not expect equities to respond positively, but rather a correction and falls in the markets, because with such data on inflation rallies, doubts about whether to cut interest rates at the Federal Reserve will be increased.

Europe: The ECB is studying the creation of a new system for supplying liquidity to its banks based on the demand they need. The idea they are pursuing is to reduce costs, the interest rate on their cash auctions for banks. At the same time, at a time when interest rates are no longer close to zero, the ECB will have to pay for the banks’ reserves deposited in the system.

Why is this important? Well, because the European Central Bank authorities would be liberalizing interest rates on the euro, which could increase their short-term fluctuations in the interbank market, and obviously this could end up affecting the banking sector and the euro depending on whether the scenario is positive or negative.

China: According to a Reuters survey released yesterday, China’s manufacturing activity most likely fell in February for the fifth consecutive month. 

Based on a poll of 33 economists, the official purchasing managers’ index (PMI) probably dropped to 49.1 in February from 49.2 in January, showing an economic contraction ongoing. 

The People’s Bank of China reduced banks’ reserve requirement ratios (RRRs) by 50 basis points on February 5, the largest reduction in two years, to support the economy’s flagging growth and free up 1 trillion yuan ($139.0 billion) in long-term liquidity.

China’s President Xi Jinping, in an effort to rebalance the economy by utilising technology to boost productivity and income, chaired a meeting of a significant economic policy-making body last week on supporting manufacturers through equipment upgrades and lowering logistics costs.

The possibility that the Chinese economy could end up zombified, and remain active only through monetary and fiscal stimulus is not out of the question, as it has already happened to the world’s largest economies, including Japan.

Meanwhile, the Hang Seng sank 1.51% and the CSI 300 lost 1.27% as Chinese markets gave up the gains of the previous day.

Geopolitics: The President of the European Commission, Ursula von der Leyen, announced yesterday the intention to unify, through the European Commission, contracts, and agreements with the military industry, in the same way as the pharmaceutical industry did during the Covid-19 crisis.

It should be noted that the president still has cases to be clarified from this last crisis, where she was accused of not revealing all the details of her private conversations with the CEO of the company Pfizer. Company that profited from a stratospheric contract paid with the budget of the European Union.

Likewise, during her tenure at the German Ministry of Defence, she was accused of mismanagement and wasteful budgetary use of public funds. Undoubtedly, as her own party will indicate, she is not the right person to make these decisions.

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