Uncomfortable Highs And Wonky Data Says Brace, Brace, Brace…

In this week’s market update as normal, we will start in the US, cross to Europe, Asia and end in Australia, and cover the key points in Oil, Gold and Crypto. My aim is to try to integrate the main themes of the week, and point forward to what may happen next.

There were a few main themes, first some key markets are touching all-time highs even if on Friday many markets took a breather, driven by profit-taking after a week of record-setting advances which were fuelled by a series of dovish central bank signals. The US dollar struggled to extend a gain as U.S. yields ticked lower.

But Central banks are still watching for greater certainty on inflation trends, and there is building speculation that the neural interest rate is higher than expected. In addition, the fuzziness in the data flows continues – a problem for central bankers who want to be data dependent, perhaps too data dependent.

The U.S. central bank sharply upgraded its outlook for growth in 2024, and Thursday’s data suggested the U.S. economy remained on solid footing after the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while sales of previously owned homes increased by the most in a year in February. This suggests the Fed doesn’t need to be in any hurry to cut rates going forward.

Investors in the coming week will be watching Friday’s personal consumption expenditures price index that will offer the latest read on inflation. The end of the first quarter also could prompt volatility as fund managers adjust their portfolios.

Investors in the coming week will be watching Friday’s personal consumption expenditures price index that will offer the latest read on inflation. The end of the first quarter also could prompt volatility as fund managers adjust their portfolios.

Its worth noting that overall, the ASX 200, excluding resources, currently trades at 18.5 times forward earnings, which is 40 per cent above its long-run average of 13.5 times, but 12 per cent above the previous peak in May 2007, just before the global financial crisis. And no, this is not just about Commonwealth Bank being at record highs. The median stock on the ASX is also trading at a P/E multiple well above its long-term average.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Uncomfortable Highs And Wonky Data Says Brace, Brace, Brace…
Loading
/

Uncomfortable Highs And Wonky Data Says Brace, Brace, Brace…

In this week’s market update as normal, we will start in the US, cross to Europe, Asia and end in Australia, and cover the key points in Oil, Gold and Crypto. My aim is to try to integrate the main themes of the week, and point forward to what may happen next.

There were a few main themes, first some key markets are touching all-time highs even if on Friday many markets took a breather, driven by profit-taking after a week of record-setting advances which were fuelled by a series of dovish central bank signals. The US dollar struggled to extend a gain as U.S. yields ticked lower.

But Central banks are still watching for greater certainty on inflation trends, and there is building speculation that the neural interest rate is higher than expected. In addition, the fuzziness in the data flows continues – a problem for central bankers who want to be data dependent, perhaps too data dependent.

The U.S. central bank sharply upgraded its outlook for growth in 2024, and Thursday’s data suggested the U.S. economy remained on solid footing after the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while sales of previously owned homes increased by the most in a year in February. This suggests the Fed doesn’t need to be in any hurry to cut rates going forward.

Investors in the coming week will be watching Friday’s personal consumption expenditures price index that will offer the latest read on inflation. The end of the first quarter also could prompt volatility as fund managers adjust their portfolios.

Investors in the coming week will be watching Friday’s personal consumption expenditures price index that will offer the latest read on inflation. The end of the first quarter also could prompt volatility as fund managers adjust their portfolios.

Its worth noting that overall, the ASX 200, excluding resources, currently trades at 18.5 times forward earnings, which is 40 per cent above its long-run average of 13.5 times, but 12 per cent above the previous peak in May 2007, just before the global financial crisis. And no, this is not just about Commonwealth Bank being at record highs. The median stock on the ASX is also trading at a P/E multiple well above its long-term average.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Wanted A Reliable Jobs Data Compass!

Australian employment soared in February and the jobless rate declined, highlighting the ongoing resilience of the nation’s labor market to restrictive monetary policy according to the latest Numberwang from the ABS. As a result, the currency rose as much as 0.6% after the data while yields on the policy-sensitive three-year government bond climbed to 3.7%. Traders now see a 60% chance of a rate cut in August, down from 80% before the data.

The strong jobs data contrasts with indicators ranging from business and consumer surveys to job vacancies and retail sales that suggest the economy is slowing.

The RBA on Tuesday left all options on the table with regards to rate moves, awaiting more data to show what’s going on. I am not sure this will help much!

The seasonally adjusted unemployment rate fell by 0.4 percentage points to 3.7 per cent in February, according to data released today by the Australian Bureau of Statistics (ABS).

And its worth noting that the current ABS labour market data is not matching the weak growth picture in the National Accounts or other second tier labour market data like jobs ads and applicants per job from Seek.

We continue to need to create around 35,000 jobs every month to stop unemployment rising, and of course the latest migration data which also came out today showed a record high net inward flow, of over 600,000.

Perhaps we will see a reversal in the data in March, because frankly the ABS Numberwanging whilst quite majestic, is simply deceptive. We need a much better jobs data compass.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Wanted A Reliable Jobs Data Compass!
Loading
/

Central Banks In Wonderland…

In a mega week for Central Bank news, after the seminal but small rise from the Bank of Japan into positive territory for the first time in eight years, the all options on the table no change from the RBA, the expected hold from the Bank of England, and the surprise 0.25% cut from the Swiss National Bank, the first such reduction for one of the world’s 10 most-traded currencies since the pandemic abated, we got the fully Monty from the FED, with another no change decision.

The recent poor inflation numbers have only nudged the governors a little in the hawkish direction; it will take more of a pickup in prices to jolt enough members away from three cuts this year, or perhaps less…

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Central Banks In Wonderland...
Loading
/

Central Banks In Wonderland…

In a mega week for Central Bank news, after the seminal but small rise from the Bank of Japan into positive territory for the first time in eight years, the all options on the table no change from the RBA, the expected hold from the Bank of England, and the surprise 0.25% cut from the Swiss National Bank, the first such reduction for one of the world’s 10 most-traded currencies since the pandemic abated, we got the fully Monty from the FED, with another no change decision.

The recent poor inflation numbers have only nudged the governors a little in the hawkish direction; it will take more of a pickup in prices to jolt enough members away from three cuts this year, or perhaps less…

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Another White-Knuckle Ride On The Markets!

This is our weekly market update covering the US, Europe, Asia and Australia plus gold, oil and bitcoin.

This was another volatile week on the markets, as traders played the volatility card and as U.S. stocks fell on Friday with the Nasdaq showing the largest decline after a hotter-than-expected producer prices report eroded hopes for imminent interest rate cuts by the Federal Reserve. Higher for longer.

Earlier this week, a hot consumer prices report sparked a selloff in equity markets as Tuesday’s latest US Consumer Price Index inflation report for January showed both headline and core prices in both monthly and annual terms climbed faster than economists’ forecasts. The former rose 3.1% year-over-year last month, hotter than the +2.9% expected. That makes it harder for the Fed to cut rates. Then later a slump in January retail sales on Thursday stoked hopes of rate cuts.

Fridays producer price index for final demand rose 0.3% last month after declining by a revised 0.1% in December, the Labor Department’s Bureau of Labor Statistics said.

Higher for longer was reinforced by Atlanta Fed President Raphael Bostic who said he needed more evidence inflation pressures are easing, but is open to lowering rates at some point in the next few months and San Francisco Fed President Mary Daly said “there is more work to do” to ensure stable prices, despite remarkable progress.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Markets Drop As The FED Reaffirms Higher For Longer Rates; Again…

Markets were disappointed yesterday, as the Federal Reserve held interest rates steady for a fourth straight meeting as expected but more importantly signaled the possibility of a rate cut, but later in the year and pretty much ditched the prospect of a reduction in March, which some optimistic economists were banking on.

As a result, Stocks saw their biggest decline on a Federal Reserve day since last March after Jerome Powell said officials want to keep their options open instead of rushing to cut interest rates.

“If stock bulls expected a rate cut in March, Powell seems to have closed the door on that,” said Oscar Munoz at TD Securities.

As a result, and other significant news, the S&P 500 fell 1.61%, the most since September while the Dow fell 0.82% and the NASDAQ slid 2.23%.

Treasuries rose as fresh concerns about regional lenders added to economic worries after New York Community Bancorp’s surprise loss which dragged their shares down by 38% after it cut its dividend and posted a surprise loss. As a result, Regional U.S. bank stocks sank on Wednesday, renewing fears over the health of similar lenders.

Interest rates took the elevator going up — but are going to take the stairs coming down.

Now we turn to the Bank of England, which will hold rates again today, and markets are not expecting a possible cut until later in the year – higher for longer, again!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Markets Drop As The FED Reaffirms Higher For Longer Rates; Again…
Loading
/

Markets Drop As The FED Reaffirms Higher For Longer Rates; Again…

Markets were disappointed yesterday, as the Federal Reserve held interest rates steady for a fourth straight meeting as expected but more importantly signaled the possibility of a rate cut, but later in the year and pretty much ditched the prospect of a reduction in March, which some optimistic economists were banking on.

As a result, Stocks saw their biggest decline on a Federal Reserve day since last March after Jerome Powell said officials want to keep their options open instead of rushing to cut interest rates.

“If stock bulls expected a rate cut in March, Powell seems to have closed the door on that,” said Oscar Munoz at TD Securities.

As a result, and other significant news, the S&P 500 fell 1.61%, the most since September while the Dow fell 0.82% and the NASDAQ slid 2.23%.

Treasuries rose as fresh concerns about regional lenders added to economic worries after New York Community Bancorp’s surprise loss which dragged their shares down by 38% after it cut its dividend and posted a surprise loss. As a result, Regional U.S. bank stocks sank on Wednesday, renewing fears over the health of similar lenders.

Interest rates took the elevator going up — but are going to take the stairs coming down.

Now we turn to the Bank of England, which will hold rates again today, and markets are not expecting a possible cut until later in the year – higher for longer, again!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

US Inflation Still Hanging Around

The US Bureau of Labor Statistics just released their December 2023 inflation read which showed the consumer price index increased 3.4% in the year through December, the most in three months and on a monthly basis, it also rose by more than forecast.

The shift up was driven by Americans paying more for housing and driving, challenging investor bets that the Federal Reserve will cut interest rates soon. Used-car prices increased for a second month, defying expectations for a decline.

The CPI excluding food and energy rose 0.3% in December from a month earlier. On an annual basis, the so-called core measure increased 3.9%. Economists favor the core metric as a better gauge of the trend in inflation than the overall CPI.

Shelter prices, which make up about a third of the overall CPI index and contributed to more than half of its advance, rose 0.5% in December. The gain included a rise in hotel prices that were down in the prior month. Economists see a sustained moderation in this category as key to bringing core inflation down to the Fed’s target.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Are Markets Head-Faking Rate Cuts Early This Year?

After the December Federal Reserve Press Conference where Jerome Powell appeared to pivot to rate cuts ahead, with a more dovish tune than just a few days before, markets dialed up their expectations of up to six rate cuts though 2024, and stock markets veered towards all time highs, while bond yields fell. Powell said at the press conference that it was premature to declare victory, though he did acknowledge the question of when to begin “dialing back” policy restraint was discussed.

Futures markets have been anticipating the Fed will cut rates six times this year, beginning with a likely quarter-point reduction in March. Traders have priced in a 67% chance of a 25 basis point rate cut in March though several Fed officials have pushed back against expectations of an imminent policy move in recent weeks.

Which begs the question, are markets fooling themselves?

Well, we now have the minutes of the Dec. 12-13 Federal Open Market Committee meeting which were released yesterday. “Participants viewed the policy rate as likely at or near its peak for this tightening cycle,” the minutes said.

Officials “reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably.”

This helps to explain why markets are lower, and bond yields higher. So yes, markets are ahead of themselves.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Are Markets Head-Faking Rate Cuts Early This Year?
Loading
/