Daily Digest: Tuesday 5th March
USA
US index performance left much to be desired through Tuesday, with the big three closing down for the second session in a row. The Nasdaq 100 ($NDX) led declines falling 1.8%, followed by the Dow ($INDU) at 1.04% and the S&P 500 ($SPX) at 1.02%. The session signalled a slight consolidation of tech pricing, with traders also preparing for Chairman Powell’s Wednesday testimony.
The ISM Services PMI (purchasing managers index) figures for February released this afternoon, coming in at 52.6, falling 0.4 short of forecasts, the result is also lower than January’s 53.4. The realised PMI still indicates that the US service sector is expanding, just at a slower rate than expected, likely due to factors such as a decrease in demand through February.
Outside of domestic data prints, China was the focus of the day for traders across the tech and automobile sector.
Apple ($AAPL) shares were dealt another blow following Monday’s EU App Store fine, as their smartphone sales in China fell 24% through January and February, pushing their market share below 16%. Smartphone demand remains strong across China, but consumers are shifting their preferences from foreign to domestic suppliers, the catalyst behind Vivo and Huawei’s market share jumps. Apple shares closed the session 2.84% down at $170.12.
In their attempts to create an export friendly chip, marketed toward the Chinese market, AMD ($AMD) have faced regulatory setbacks. Despite the proposed chip being weaker than its American counterparts, regulators have still deemed it too powerful to sell without license, the result of growing security concerns and politically driven export restrictions. AMD shares fell 0.11% through the session as investors are uncertain of the firms ability to access the Chinese semi-conductor market.
Tesla ($TSLA) have recorded a decrease in their China shipments, facing a similar problem to Apple as Chinese domestic suppliers pushback. This change has been highlighted by the recent growth of BYD, the Chinese domiciled EV conglomerate. Additionally, output from Tesla’s German Gigafactory was suspended due to a power failure on Tuesday morning which further rocked share prices, following their 7% decline on Monday. Shares closed Tuesday’s session at $180.74 a 3.93% decrease, meaning this week’s losses extend above 10%.
Finally, NIO the US listed EV firm once deemed ‘Chinese Tesla’ posted their earnings on Tuesday, with fourth quarter figures disappointing investors. In terms of annual performance, the firm delivered 160,038 vehicles, generating revenues of $7.83bn. However, net losses for 2023 rose 43.5% YoY to $2.918bn. Trader reactions were mixed with prices falling 9% at the open, but upside momentum picked up through the session with prices peaking at $5.62 a figure just over 90% lower than its all time highs.
In terms of US politics, March 5th is Super Tuesday, where voters will turn out for Primaries in 15 states. The general consensus remains that markets are to face another Biden v Trump election in November. However, Haley will be looking to capitalise on her DC primary win if she is to cause any upset to Trumps campaign for the Republican nomination.
Europe
For the second session running index activity was relatively subdued across Europe as traders await the direction of Wednesday’s UK budget announcement. The FTSE 100 (FTSE) rose 0.076% to 7,646.16, while the STOXX 600 (€SXXP) fell 0.27% to €496,07 sitting €1.81 off it’s all time highs. The DAX (€GDAXI) and CAC (€FCHI) also closed the session down, falling 0.1% and 0.3% respectively.
Rest of the World
The Nikkei 225 (¥N225) rose 0.47% through Tuesday’s session breaking new highs of ¥40,226, before prices slid back down to ¥40,097 at the close. Another strong trading performance followed the release of YoY CPI data for February, which indicated that inflation in the Tokyo area was 2.5%, although in line with analyst expectations, figures are ahead of the BOJ’s inflation target of 2%. It is believed amongst speculators that this could be the catalyst for a change in monetary policy from negative rates, which have targeted deflation to rate hikes in order to manage inflation. The Yen also strengthened against the dollar on Tuesday falling from 150.427 as low as 149.7 by 3pm GMT.
The Shanghai Stock Exchange Composite Index (¥SSE) rose 0.41% marking a fourth consecutive session of gains, as politicians and regulators work to increase investor confidence in Chinese equities.
Cryptocurrencies
Bitcoin managed to break $68,000 during trading, as it aimed at a move to $70,000. Momentum appeared strong throughout the morning, but by late afternoon, prices had retraced to $64,000 a decrease of some 4.1% from the same time on Monday. Investor woes continued into the evening as prices pulled back to $61,897 by 9pm GMT marking an 8.18% daily decline.
The second-largest cryptocurrency, Ethereum also suffered an increase in downside pressure into the afternoon. However, this downturn failed to erase earlier gains, with prices rebounding to $3,637 remaining 1.72% higher than the previous day. The current market capitalisation of all cryptocurrencies now sits around $2.42 trillion.
Exchanges, including Binance and the publicly listed Coinbase ($COIN), suffered outages through Tuesday, presumably the result of high service demand and increased transaction volume. Coinbase shares slipped 5.4% through trading, with the exchange hit by both uncertainty on service stability and a decrease in trading momentum across the market. As noted last week, such outages need to be effectively addressed in order for investors to maintain a positive outlook on shares.
Commodities
Crude Oil prices extended declines falling 0.69% on Tuesday to $78.20 per barrel, despite worsening global geopolitics and mixed economic data signals. Headlines were dominated by reports regarding a possible escalation of tensions across the Middle East. The Israeli Defence Minister suggested the nation may be forced to act on the threat of Hezbollah in Lebanon, further extending the scale of fighting. While these situations are primarily humanitarian crises, they also have implications for financial markets. An expansion of fighting into Lebanon poses risks to both oil production and trade flows across neighbouring states, including Jordan and Syria. This in turn could lead to a rise in Crude pricing.
Gold continued its four day-streak of price increases, breaking new highs at $2,150.50. By 9pm GMT, prices had fallen back slightly but remained up on Monday by 0.54%. This move is likely the result of traders attempting to anticipate the direction of Fed Chair Powell’s Wednesday Testimony. Price increases suggest that the market believes there will be a dovish undertone to Powells message. As explained yesterday, a decrease in interest rates reduces the opportunity cost investors face when holding gold, therefore positively benefiting capital inflows.
What to watch
UK Spring Budget Announcement
Fed Chair Powell’s Capitol Hearing
US Earnings:
JD.com
Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
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