Last week, the international market was volatile, with US inflation data suppressing expectations of interest rate cuts and geopolitical factors driving up oil prices.
In terms of the market, the US stock market has ended its rebound momentum, with the Dow Jones Industrial Average falling 0.11%, the Nasdaq falling 1.34%, and the S&P 500 index falling 0.42% for the week. The three major European stock indexes performed well, with the FTSE 100 index in the UK rising 1.84%, the DAX 30 index in Germany rising 1.13%, and the CAC 40 index in France rising 1.56%.
There are many highlights this week, and the Federal Reserve will release meeting minutes. The details of the committee's internal policy discussions are worth paying attention to. European and American economies updated their purchasing managers' index (PMI) data for February, highlighting the momentum of economic recovery. The central banks of Indonesia, South Korea, Türkiye and other emerging economies will issue interest rate resolutions. The US stock earnings season ushered in a new climax, and Nvidia, Wal Mart, etc. will release results.
Federal Reserve releases minutes
The data released last week showed that the monthly rates of US CPI and PPI in January were higher than market expectations, indicating that inflationary pressure will continue to be a key factor hindering the Federal Reserve's policy shift.
This week, the minutes of the Federal Reserve's January meeting will be released. At that time, the resolution declared a cautious attitude towards the next steps while maintaining interest rates unchanged. Investors will closely observe the details of internal discussions within the committee and seek any clues about the potential timing of the first interest rate cut.
Several officials, including Federal Reserve Vice Chairman Jefferson, will continue to deliver routine speeches and may continue to emphasize a patient stance on interest rate cuts, thereby suppressing previously fervent policy speculation from the outside world. The yield of US Treasury bonds has stabilized, and attention should be paid to the potential impact of subsequent rebounds on risk appetite.
In terms of data, it is worth noting that the leading indicators for January's completed housing sales and consultation are worth noting. Previously, the annual rate of new home construction in the United States in January decreased by 14.8% to 1.3 million units, the largest decline since April 2020, indicating that monetary policy still poses pressure on the real estate market. At present, the leading economic indicators of the consulting firm have fallen for 20 consecutive months, setting a record for the longest consecutive decline since the Lehman crisis, but the US economy has not shown any signs of recession.
The financial reporting season is coming to an end. The biggest highlight of the next week is undoubtedly the artificial intelligence leader NVIDIA. In addition, retailers such as Wal Mart, Home Depot and Berkshire Hathaway under Warren Buffett will also disclose their performance.
Crude oil and gold
Crude oil futures have risen for the second consecutive week, with US oil reaching a new high in nearly three months. Investors are weighing the prospect of a Fed rate cut, tensions in the Middle East, and uncertainty in the outlook for crude oil demand. The WTI crude oil near month contract rose 3.06% to $79.19 per barrel, while the Brent crude oil near month contract rose 1.56% to $83.47 per barrel.
The escalating tension on the border between Israel and Lebanon has once again raised concerns about the Gaza conflict. "Oil prices may benefit from the tension in the Middle East. The more Iran and Israel are at odds, the greater the pressure on oil - Israel's attack on Lebanon is moving in this direction," said Stewart Glickman, an energy equity analyst at CFRA Research
However, Barbara Lambrecht, a commodity strategist at Deutsche Bank, is cautious. She said in a report, "The recovery of oil prices may lose momentum, and although the geopolitical situation remains tense, demand concerns are resurfacing, partly because hopes of a rapid rate cut by the United States may be too early."
International gold prices have fallen for the second consecutive week. The COMEX gold futures contract for February delivery on the New York Mercantile Exchange fell 0.58% weekly to $2011.50 per ounce.
Traders have lowered their expectations for the Federal Reserve's interest rate cut from March to June. Atlanta Fed Chairman Bostic said last week that more time is needed to measure the prospects of interest rate cuts.
The tightening of monetary policy has weakened the attractiveness of gold. According to Everett Millman, Chief Market Analyst at Gainesville Coins, gold is unlikely to remain above $2000 for the long term as the Federal Reserve is unlikely to cut interest rates in March. The strong economic growth in the United States indicates intensified inflationary pressure, which is a disadvantageous factor for gold. "I expect the gold price to further drop to the level of $1960," he added.
The European economy is under pressure
The European Union released an economic forecast last week, stating that the economic foundation of the eurozone entering 2024 is weaker than previously expected, and economic growth is expected to be sluggish again this year. It is expected that the GDP of the Eurozone will grow by 0.8%, much lower than the 1.2% in November last year. Meanwhile, the economic forecast for the Eurozone in 2025 has been lowered from 1.6% growth to 1.5%.
Last week, ECB President Lagarde stated that the ECB must avoid premature interest rate cuts as this could prolong high inflation and even force the bank to tighten policies again. Lagarde said at a European Parliament hearing in Brussels, "The last thing I want is for us to make hasty decisions and then see inflation rise again, and we have to take more measures."
The minutes of the January meeting of the European Central Bank will also be released on Thursday. On the issue of interest rate cuts, there are certain disagreements within the European Central Bank. Austrian Central Bank President Holzmann stated that there may not even be a rate cut this year, while European Central Bank Chief Economist Ryan stated that there is a risk of excessive tightening. Italian Central Bank President Panetta believes that progress towards achieving the 2% inflation target is still very fast, and the moment for a reversal of monetary policy stance is rapidly approaching.
According to the UK Office for National Statistics, Gross Domestic Product (GDP) declined by 0.3% in the fourth quarter of last year, and due to a 0.1% contraction in the third quarter of last year, the UK has officially entered a technical recession. British Chancellor of the Exchequer Hunter has stated that he hopes the central bank can start reducing borrowing costs before early summer.
Investors have increased their bets on the Bank of England's interest rate cut this year, with a probability of about 68% for the first rate cut in June. Bank of England Governor Bailey said last Wednesday that he still hopes for more evidence that inflationary pressures are easing. Sanjay Raja, Chief UK Economist at Deutsche Bank, believes that while the central bank's focus may still be on price data, the significant decline in output and falling into a technical recession are undoubtedly more unsettling.
Highlights of this week