Daily Digest: Friday 8th March
USA
After a tech focussed rout, US index momentum slowed, following two strong sessions the Nasdaq 100 ($NDX) closed 1.53% down at $18,018.45, the S&P 500 ($SPX) closed 0.65% down at $5,123.69, and the Dow ($INDU) fell 0.18% to $38,722.69.
As it was the first Friday of the month, US Non-Farm payroll data released. February figures came in at 275k, ahead of both analyst expectations of 198k and January’s downward revised 229k. This strong growth suggests expansion in the Non-Farm US jobs market, though such data has a potentially inflationary undertone. Following the release, index futures dropped while spot gold prices continued to strengthen. To ease narratives regarding a rise in inflationary pressures, the total US unemployment rate came in 0.2 percentage points higher than analysts had expected at 3.9%, this also marked an increase on January’s figures. Due to a mixed set of signals is it unlikely that investors will experience any resulting sharp movements across financial markets.
President Biden delivered his State of the Union address on Thursday evening, the main economic cues being inflation and foreign policy, specifically that of US-China relations. In terms of inflation the speech didn’t yield much, aside from political point scoring. Biden praised the current government for its role in reducing core inflation from 9% to 3%, having also facilitated an increase in take home pay. Biden also ensured that that the interest rate landing scenario would be soft, but in the current market, what weight this holds is somewhat debatable.
The President emphasised the importance of a ‘competition, not conflict’ approach to relations with China, favouring supportive growth and development, over tensions and trade wars. However, it was made clear that the USA is willing to act if relationships sour. ‘Advanced technologies’ presumably referring to US and allied software and microchips were directly addressed, with Biden pledging to continue his protection of such innovations so ‘they’re not used against us’. The recent case that comes to mind here is that of AMD, and their failure to deliver an export friendly chip earlier this week. It remains clear that such measures will continue, requiring US firms to pursue product adaptations in order to comply with export regulation.
Finally, while on the theme of technology specifically that of microchips, Biden backed his 2022 Bipartisan ‘Chips and Science Act’, stating that while the US invented such products, they had lost production overseas. His renewed stance is that the ‘Supply chain for America begins in America’. This will no doubt be construed as a positive endorsement of the sector by tech investors, meaning that the US domiciled chipmakers Nvidia ($NVDA), AMD ($AMD), and Intel ($INTC), will be ones to watch through the session.
As expected, US equities had a generally strong open, with gains magnified across tech. The posterchild of the ‘AI bubble’ Nvidia broke all-time highs at $974, while competitor AMD also broke highs reaching $227.30. Record highs were not contained to chipmakers, as consumer tech firm Meta ($META) also breached new highs, climbing to $523.57. However, celebrations were short lived, as a mid session turn in momentum triggered a tech sell-off, pushing Nvidia shares down 5.55% and AMD down 1.89% by the close. Though valuations remain high and portfolio damage was somewhat limited, investors will likely remain cautious into next week as we approach a number of key economic data prints including US CPI on Tuesday.
Europe
European market activity had slowed by Friday’s close after strong Thursday performances. The FTSE 100 (FTSE) ended a three-day streak of gains, closing 0.43% down at 7,659.74. While both the French CAC (€FCHI) and German DAX (€GDAXI) broke all-time highs during the session. The CAC closed up 0.15% at €8,028.01, while the DAX fell slightly off its session highs closing 0.16% down at €17,814.51. The STOXX 600 (€SXXP) also closed marginally up, rising 0.020% to €503.26, as it moves towards new 52-week highs.
FTSE 100 losses were led by Entain (ENT.L) as shares in the gambling and entertainment firm continued to slide. Entain’s share prices have now fallen 17.91% this week, following the introduction of new gambling regulations across multiple territories in which the firm operates. Despite an optimistic outlook, the firm still states that disruptions and changes could cause revenue losses during FY24 of around £40m. To measure the true effect of regulatory reform analysts will likely need to watch firm revenue and profit performance across multiple periods to come. In terms of trade volume in FTSE listed shares, the banking and financial service sector led the session, with traders betting heavily across Lloyds (LLOY.L), Barclays (BARC.L), and HSBC (HSBA.L), all three of which closed Friday down.
Rest of the World
The Nikkei 225 (¥N225) managed to end its two day losing streak, rising 0.23% by market close to ¥39,688.94. The Japanese Yen had also risen marginally against the dollar during Friday morning trading in the UK, up 0.0257% at ¥147.94 per dollar. A strengthening of the Yen has slowed Nikkei performance through the trading week, as Japanese equities become relatively more expensive for foreign investors, who require the now higher priced Yen to purchase Yen denominated assets. Traders will now be keeping a close watch on Sunday’s Q/Q GDP release, analyst expectations are 0.3% indicating positive growth across the Japanese economy. Higher figures are favoured here, signalling greater-than expected economic expansion, this print should have an impact on both equity and FX markets, with direction dependent on the actual data.
The Shanghai Stock Exchange Composite Index (¥SSE) also managed to close the week with a stronger session, rising 0.61% to ¥3,046.02
Cryptocurrencies
Bitcoin briefly broke its all-time highs this afternoon, breaching $70,000 before an intense barrage of sell orders pushed prices down to $67,000. By 9pm (GMT) Bitcoin had regained some ground, trading at $69,091.76 marking a 2.29% 24hr gain. Ethereum also edged toward $4,000, as it continued to break 52-week highs. Prices reached around $3,996, before traders sold off pushing prices under $3,850.
’Crypto Stocks’ had another strong session, with global cryptocurrency exchange Coinbase ($COIN) continuing to ride the benefits of a surge in investor interest and trading volume across crypto-assets, driving revenues for the firm higher. Shares managed to close the session 5.77% up at $256.62, despite having slid almost $13 per share off session highs. Adding to positive market sentiment, a high profile Goldman Sachs analyst upgraded their Coinbase Global Inc rating and price targets. This saw shares moved to neutral from sell, with a revised price target of $282, a level which is now only 9% above Friday’s close. MicroStrategy ($MSTR) also continued to outperform the market, with shares rising 9.66% on Friday. This took weekly gains to almost 19%, with shares now priced at $1,425.59, this shows that the firms Bitcoin hoarding strategy has so far been a success, so far as markets are concerned. Once again when compared to the performance of other equities across the tech sector through the session, investors seem fairly resilient, with crypto facing assets moving inversely to the likes of chipmakers, as momentum fails to weaken.
Commodities
Crude Oil set its sights on $80 per barrel Friday morning, rising to 24hr highs of $79.99. An early sell-off led prices downward, which summarised the direction of the rest of the session, prices falling 1.34% to $77.86 per barrel by 9pm (GMT). Crude prices have now fallen 1.55% in the last two sessions as buy-side investors fail to build momentum, a position worsened by demand shocks, as emerging market economies notably China are consuming less Crude. Ultimately this has compensated for supply side shocks, including the extension of OPEC+ production cuts, which are now pencilled in until June 24 after Sunday’s announcement.
Gold futures continued to rise through Friday morning looking to close up for the seventh consecutive session. As mentioned earlier this week, price action is likely the result of increased interest rate cut expectations across the major Central Banks, including the Federal Reserve, ECB, and BOE as policymaker confidence increases. A decrease in rates reduces the opportunity costs faced by investors purchasing gold, as bond yields fall in line with rates. Gold concluded Friday’s session trading up a further 0.86%, with an ounce now priced at $2,183.90, as investors manage to weather the negative effects of a decrease in Gold ETF inflows, and the explosion of cryptocurrency and digital asset prices and subsequently demand.
What to watch through the Weekend
Chinese YoY CPI
Japanese GDP (Q)
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/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
|https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/02/07/remarks-of-president-joe-biden-state-of-the-union-address-as-prepared-for-delivery/
https://www.entaingroup.com/news-insights/latest-news/2024/2023-full-year-results/