Daily Digest: Thursday 14th March
USA
The US PPI print for February came in at 0.6%, some 0.3 percentage points higher than expected signalling inflationary pressures are still present within the US economy, and the cautious approach toward cuts adopted by the Fed is appropriate. Following the print the Dollar strengthened against the Euro trading at 1.0887 by 20:00 GMT from its 24hr lows at 1.0953. US Retail sales growth figures for February also released, coming in at 0.6%, while estimates were 0.2 percentage points higher at 0.8%, suggesting growth in consumer spending was slower than expected, reducing fears of a sustained rise in inflation. This marks a second print following Friday’s employment figures that has shown a somewhat contradictory outlook on the economy and inflation.
As a result, US indexes traded within their relatively typical margins, as trader reactions to the PPI and retail sales figures were mixed. The Nasdaq 100 ($NDX) fell 0.30% to 18,014.81, the S&P 500 ($SPX) fell 0.29% to 5,150.48, and the Dow ($INDU) fell 0.35% to 38,905.66.
After failing to appease investor demands for a competitive AI product, tech giant Apple ($AAPL) has taken its first public steps to improve its market position, acquiring start-up Darwin AI, drawing its employees into Apple’s integrated AI division. Upon news of the purchase, Apple shares rose, closing the day 1.09% up at $173. If successful, this move could see about an end to Apple’s AI drought, as the firm has so far failed to deliver a meaningful product capable of capitalising on strong sector growth. The potential for Apple to strengthen its position would be welcomed by the market, especially since investors need a positive catalyst to overcome issues stemming from a fall in Chinese market sales and legal challenges in Europe, which have dampened short term share performance.
On Wednesday evening, the US House of Representatives unanimously voted in favour of a bill banning the use of Chinese-owned social media platform TikTok on devices in the US, stating the app poses a risk to national security due to the its handling of user data. The proposed bill will now progress to the US Senate. Action against TikTok has widened uncertainty over the long-term viability of Chinese multinational operations in the US. In terms of markets the effects of such hesitation should be experienced by dual-listed equities.
The US EV sector also experienced a notable sell-off during the session, following reports on Wednesday that EV manufacturer Fisker ($FSR) was exploring bankruptcy. Fisker shares fell 51.41% during the session to $0.15, while shares in Tesla ($TSLA) fell 4.12%, Rivian ($RIVN) fell 8.71%, and Lucid ($LCID) fell 6.07%. This change in momentum across the sector comes as the so called ‘hype’ around EVs has begun to falter, as the future of sustainable transport remains contested. Concern amongst investors has also been exacerbated by revisions to governmental goals, especially across Europe, as climate initiative deadlines are delayed in part due to fiscal restraints.
Europe
The FTSE 100 (FTSE) had a slower session as traders priced in US economic data, alongside a strengthening of the UK housing market. The FTSE fell 0.37% during the session to 7,743.15, with prices driven down by mining conglomerate Anglo American and UK based bank NatWest, whose shares fell 5.34% and 5.06% respectively.
The French CAC (€FCHI) closed the session up 0.29%, breaking new all-time highs at its intraday peak, with the index now trading at 8,161.42. Momentum had somewhat slowed in Germany with the DAX (€GDAXI) falling back 0.11% to 17,942.04, while the STOXX (€SXXP) index tracking wider Euro market activity also closed down, falling 0.18% to 506.40.
Rest of the World
The Nikkei 225 (¥N225) managed a slightly stronger session, trading against expectations of imminent rate hikes, rising 0.29% to 38,807.38. Additionally, the Japanese Yen weakened against the dollar, trading at ¥147.79 by 10:20am GMT. This makes conditions for foreign investors marginally more accommodative, though the Yen is still sitting far below the ¥150 levels seen earlier in March. Traders now await another US inflation release in the M/M PPI, however, if figures fall in line with expectations there shouldn't be any serious shifts in momentum. At around 15:15pm GMT Japan experienced its largest Earthquake of March so far, measuring a magnitude of 5.8. The epicentre was in the North Pacific off the Fukushima coastline in the East of the country. Initial reports of the event pushed Nikkei futures down, however a tsunami warning was not triggered meaning that despite its magnitude, disruption to life was minimal and trading should continue at a normal level.
The Shanghai Stock Exchange Composite Index (¥SSE) marked a session decline of 0.18% trading at 3,038.23, now trading just off last week’s highs.
Cryptocurrencies
There was a general sell-off across cryptocurrency markets with Bitcoin falling 3.12% off its 24hr highs, trading just under $71,000, while Ethereum fell 3.77% to $3,850. Dogecoin managed to trade against the market, rising 3.77% following Elon Musk suggesting the coin may be accepted for Tesla purchases in the future.
The so called ‘crypto stocks’ that have benefited from a rally in cryptocurrency prices demonstrated that they not only track the market up, but also down. US based exchange Coinbase Global Inc ($COIN) shares fell 7.17%, trading into Friday at $233.67, while MicroStrategy ($MSTR) shares fell 5.06%, despite yesterday’s announcement of the sale of a further $500 million in convertible notes, the proceeds of which will likely be used to purchase additional Bitcoin.
Commodities
Upward price momentum continued in the Crude market, fuelled by yesterday’s US crude inventory drawdowns, and the further escalation of geopolitical tensions and conflict in Eastern Europe. Crude rose 1.76% to $81.12, marking a fourth consecutive day of gains, as prices finally broke and held above the $80 per barrel level.
Gold traded down 0.66% to $2,166.30 per ounce, erasing yesterday’s gains as February’s PPI release came in hotter than expected, acting as a hurdle through the day’s trading. As noted, the PPI release may cause delays to interest rate cuts, as traders anticipate the Fed holding off until they have a clearer picture of inflation in the US. This delay holds interest rates higher for longer, increasing the opportunity costs of holding gold as an asset, as investors can purchase ‘risk-free’ assets that offer higher yields.
What to watch
Chinese House Price Index (Y/Y)
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.forexfactory.com/calendar?day=feb29.2024&event=136171#detail=136171