Daily Digest: Thursday 7th March
USA
US markets performed well through Thursday, the Nasdaq 100 ($NDX) broke new intraday highs closing up 1.56% at $18,297.99, the S&P 500 ($SPX) was also able to break intraday highs closing up 1.03% at $5,157.36. Once again the Dow ($INDU) lagged slightly behind in terms of relative gains rising 0.34% by the close. US market movement was predominantly driven by moves in the tech sector, with shares in both Nvidia ($NVDA) and Meta ($META), breaking all-time highs, closing at $926.69 and $512.19 respectively.
After a turbulent month with share prices falling around 66% since the 30th January, New York Community Bancorp ($NYCB) seems to have reached the light at the end of the proverbial tunnel. The company has secured $1bn in loan funding from Liberty Strategic Capital, an investment firm led by former US Treasury Secretary Mnuchin. This funding should alleviate the short-term pressures that the bank face with long-term reforms of the banks balance sheet likely. In a Thursday statement Mnuchin relayed a positive narrative, stating that despite risk identified in NYCBs loan facilities, issues with the perceived risk of loans is manageable. This has once again cast the spotlight on US regional banks, as investors and depositors alike worry about the repeat of crises such as that of March-June 2023, which saw the collapse of Silicon Valley bank, Signature, and First Republic.
Fed Chair Powell’s second day of testimony in front of Congress managed to hit on a range of key topics, including commercial real estate, interest rates, and CBDCs. Powell stated that the US is far from adopting any form of central bank issued or backed digital currencies, which should spark a positive reaction from crypto investors as their assets will remain unchallenged. Powell renewed fears about US bank exposure to bad commercial real estate loans, suggesting that there may be further bank failures as losses materialise, however he does not expect there to be any contagion to the wider banking sector. Finally, Powell reiterated the point that interest rate cuts will come this year as the FED builds confidence, supported by positive data outlooks, which once again reinforces the views of the market as traders price in cuts.
President Biden will provide his State of the Union address later this evening, which alongside US Non-Farm payroll data will likely be the focus of traders into Friday.
Europe
After a relatively subdued morning, European markets put on a strong display, as the ECB announced the outcome of their March Monetary Policy Committee meet, and President Christine Lagarde delivered her monetary policy update.
The FTSE 100 (FTSE) rose 0.17% to 7,692.46, marking a third consecutive session of gains, with traders having had the evening to mull over Yesterday’s UK budget announcement, with sentiment remaining positive. In mainland Europe, the STOXX 600 rose 0.99% closing just €0.65 off its all-time highs at €503.16. While, the French CAC (€FCHI) rose 0.77% to €8,016.22, and the German DAX (€GDAXI) trailing slightly behind, rising 0.71% to €17,842.85.
The European Central Bank acted in line with expectations, holding the Eurozone’s main refinancing rate at 4.5%, favouring a cautious approach to cuts as inflationary pressures persist. The ECB also amended their 2024 inflation expectation, reducing estimates by 0.4 percentage points to 2.3%. This sent positive signals across equity markets, with traders increasing their bps rate cut expectations for 2024, as the current rate policy seems to have effectively reduced inflation.
Sweden has officially joined NATO.
Rest of the World
The Nikkei 225 (¥N225) had a poor session, sliding 1.23% and falling below the ¥40,000 yen level for the first time since Monday. The index is now priced at ¥39,958.71, as traders faced a higher than expected earnings print and a strengthening yen, leading to weakened performance as a monetary policy pivot remains at the forefront of minds.
As noted, the Japanese Yen continued to strengthen, trading at ¥147.79 against the US dollar by 11:30am (GMT), up from ¥149 on Wednesday. Traders are now predicting that the BOJ will begin the rate hike cycle as early as March, following an overnight wage data print. An increase in domestic interest rate leads to an increase in currency demand, as foreign investors position to exploit the higher returns offered on Japanese bonds as yields rise. In order to purchase these Yen-denominated bonds investors must exchange their currency for Yen. Currency demand should remain high as the BOJ’s March monetary policy statement nears.
Momentum continued to slow in China, as the Shanghai Stock Exchange Composite Index (¥SSE) fell 0.41% through the session closing at ¥3,027.40.
Cryptocurrencies
Bitcoin regained some upward momentum through Thursday, breaking a new 24hr high of $67,980 as traders work past Tuesday’s price slip. Ethereum also had a strong day as buy-side momentum pushed prices above $3,800, targeting new 52-weeks high which currently sit just above $3,905.
So called ‘Crypto Stocks’ also resumed their drive upwards, with Coinbase Global Inc ($COIN) shares breaking new 52-week highs at $245.75, before falling back to $242.62. MicroStrategy ($MSTR) shares also rose, closing up 4.32% moving from $1,246 to $1,300.02. This has signalled that despite volatility and regulatory pressures equity investors are willing to adopt and carry cryptocurrency market associated risk within their portfolios.
Commodities
Crude fell 0.21% to $78.96 per barrel, after prices failed to hold above the $80 level earlier this week.
Gold on the other hand has continued to act against the odds, rising for a sixth consecutive day. As of 9pm GMT, prices had risen 0.39% to $2,166.7 per ounce, slipping slightly off its new all time highs of $2,172.
What to watch on Friday
President Biden’s State of the Union Address
US NFP (Non-Farm Payroll)
Total US Unemployment
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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