Daily Digest: Thursday 14th November


Equity Round-up
US equity direction was clearer on Thursday, as the three major indexes experienced sell-offs closing lower. The Nasdaq 100 ($NDX) experienced the sharpest declines falling 139.49 points (0.66%) to 20,896.67, followed by the S&P 500 ($SPX) which fell 36.21 points (0.60%) to 5,949.17, and the Dow ($INDU) which fell 207.33 points (0.47%) to 43,750.86. In terms of economic data prints, October PPI came in at 0.2% on a month-on-month basis, in line with analyst estimates. PPI measures the average increase in the price of goods and services sold on a monthly basis, with any increase signalling the presence of inflation. While figures failed to shock, they marked a 0.1 percentage point increase from September, signalling that inflation within the US economy remains persistent. Similarly to CPI, PPI data is less significant when used in isolation, however, when used alongside other key inflation data points, it provides a far stronger outlook on inflationary conditions.

European markets have remained quiet in the absence of any major macroeconomic developments. The UK’s benchmark equity index, the FTSE 100 (FTSE) extended gains, climbing 40.86 points (0.51%) to 8,071.19, despite wider market declines. Meanwhile, on the continent, the STOXX 600 (STOXX) broke a losing streak to rise 5.44 points (1.08%) to 507.03.

Equities across Asia experienced general sell-offs through the session. Chinese equities saw sharp declines as yesterday’s rally failed to hold, with the Shanghai Composite (¥SSE) falling another 59.44 points (1.73%) to 3,379.84, extending weekly losses to 3.49%. As mentioned earlier this week, the technical picture supporting the performance of Japan’s benchmark equity index, the Nikkei 225 (¥N225) was weak. Through trading on Thursday, the index extended declines, falling a further 185.96 points (0.48%) to 38,535.7, with a five session loss now totalling 3.14%.

This raises the question, do the fundamentals support recent market performances, or is there a deviation. As of the end of October, Tokyo Area CPI, a leading indicator for wider Japanese inflation sat at 1.8% on an annualised basis. This figure came in 0.1 percentage points above analyst expectations, but remains below the BOJ’s key 2% target level. The BOJ, remaining cautious of inflationary pressures, voted to hold interest rates within the current range of 0%-0.25% upon the conclusion of their penultimate monetary policy meet of 2024. At face value, interest rates remain low, which is favourable for businesses as the BOJ adopts an accommodative stance toward business and economic growth, however, the index is trading over 1,000 points lower than its October highs.

This pushes us to look elsewhere to establish the catalysts behind adverse price action. Throughout the year, FX markets have played a pivotal role in Japanese domestic equity performances as traders weigh the argument to invest locally or overseas. As of 20:35 GMT, the Japanese Yen was trading against the US Dollar at 156.289 with the currency weakening a further 0.52% in the last 24 hours. Currency demand from fixed income perspective remains weak as domestic yields are low, however, currency weakness should increase the demand of domestic assets from foreign traders as they are trading at a relative discount. Though once again, equity fundamentals seem to deviate from the technical trends discussed previously.


What to Watch Tomorrow

  • UK MoM GDP

  • US Retail Sales MoM

  • US Earnings
    Alibaba ($BABA)


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://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com

Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice

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Daily Digest: Monday 18th November

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Daily Digest: Wednesday 13th November