As we head into the Asia-Pacific market, what is ahead for economic releases and events:
- Japan is on holiday
- At 4:45 PM ET, New Zealand retail sales for Q4 will be released with estimates of -0.2% versus 0.0% last quarter. The core retail sales are expected to also declined by -0.1% versus 1.0%. This week, the Reserve Bank of New Zealand will announce their interest-rate decision next Wednesday (in New Zealand). There was some calling for a rise, but the following inflation expectations announced last week have eased some of that thought. Nevertheless, RBNZs Orr still feels that the central bank has “more work to do” in their quest to get inflation back in the 1-3% target area. CPI inflation for Q4 came in at 0.5% which was as expected but well below the 1.8% from Q3.
- FOMC member Cook is scheduled to speak at 5 PM ET.
- At 7:01 PM ET the UK GfK consumer confidence will be released with the expectations of -18 vs -19 last month.
- FOMC member Waller is also scheduled to speak. He will speak at 7:35 PM ET about the economic outlook
- China House prices YoY for January will be released at 8:30 PM ET. Last month they came in at -0.45% (no estimate)
Coming into the week’s end, the major indices are mostly higher:
- Japan’s Nikkei will be closed, but closed the week up 1.59%
- Shanghai composite index is up 4.27%
- Hong Kong’s Hang Seng index is up 2.47%
- Australia S&P/ASX index is down -0.6%
The US stock market was goosed sharply higher on the back of the surge in AI stocks and should provide a tailwind for stock markets.. The S&P index closed at a record level. The NASDAQ index tested the high closing level at 16057.44, but backed off a bit into the close. It still rose by 2.96% on the day. The Dow Industrial Average closed at a record level as well.
In the US debt market, yields were mixed in the US with the short end higher and the longer end modestly lower:
- 2-year yield 4.715%, +6.3 basis points
- 5-year yield 4.342%, +4.3 basis points
- 10-year yield 4.338%, +1.6 basis points
- 30-year yield 4.474%, -1.7 basis points
Crude oil was higher in the day by $0.62 or 0.80% at $78.53. Gold was down marginally by $2.56 or -0.13% at $2023.36. Bitcoin was near unchanged at $51,778 as the flow of funds moved into stocks.
IN the forex market in the US session, the major indices are relatively close together. The NZD is ending the day as the strongest of the major currencies (although it had it’s ups and downs), while the JPY is the weakest. The USD is ending modestly lower but mixed.
In FedspeaK in the US session:
- Fed Governor (and voting member) Philip Jefferson provided insights into the current economic and inflation outlook, expressing a cautious stance on the future of monetary policy. He noted the possibility of beginning to cut the policy rate later this year, underscoring the bumpy path down for inflation as highlighted by the disappointing Consumer Price Index (CPI) data for January.Jefferson pointed out three key risks to the economic outlook: resilient consumer spending that could halt progress on inflation, potential weakening in employment, and ongoing geopolitical risks. Despite these challenges, he remains cautiously optimistic about making progress on inflation, emphasizing the importance of reviewing a comprehensive set of data to assess the economic outlook and to guide future monetary policy decisions.
- Meanwhile, Fed’s Harker expressed cautious optimism about the U.S. economic outlook, acknowledging the possibility that the Federal Reserve might be approaching a point where it could consider cutting rates, though the timing remains uncertain. Recent CPI data indicated progress towards inflation control, albeit unevenly. Harker highlighted the risk of the Fed cutting rates too prematurely, amidst concerns over increasing credit delinquencies. However, he noted several indicators suggesting that the labor market is achieving better balance, and remarked on the continued strength of the U.S. GDP. Harker emphasized the need for further assurance that inflation is steadily returning to the Fed’s 2% target, suggesting that the Fed is close but not quite there yet in achieving its inflation goal. He also mentioned that the recent uptick in layoffs should not be interpreted as a precursor to a recession, reinforcing a generally positive but cautious economic outlook.