The Week in Review: March 4th-8th
Overview
US equities had a rollercoaster of a week, driven by an influx of conflicting economic data prints and growing pressures on some large-cap US businesses internationally. European market losses were somewhat contained, with index activity benefiting from the UK’s Spring Budget and the ECB’s rate decision. The Japanese Nikkei 225 suffered losses off the back of a strengthening of the Yen, as the nation exits deflation, while the Chinese SSE Composite Index closed the week higher. In terms of relative gains, cryptocurrencies stole the show for the second week running, with Bitcoin breaking all-time highs and Ethereum breaking 52 week-highs before a pullback on Friday afternoon. Finally, in the commodity markets, Crude failed to gain a foothold, losing 2.51% this week, while Gold rose
3.85% as traders eye potential rate cuts.
% Change - Monday 9pm to Friday 9pm (GMT)
USA
China caused ripples across US markets on Tuesday, as Tesla ($TSLA) , AMD ($AMD), and Apple ($AAPL) all faced troubles placing and selling their products in the Chinese market. This comes as domestic competition and consumer patriotism increases, while US export regulations strengthen. Prices were able to rebound off the back of positive economic data prints, which alongside the testimony of Fed Chair Powell managed to reinforce market expectations of June rate cuts.
Non-Farm payroll and Total Unemployment data for February was released Friday. Non-Farm payroll figures rose by 275k in February, around 77k higher than analyst expectations, signalling an acceleration in job market growth. However, too cool any possible inflationary narratives, total unemployment in the US rose to 3.9% in February, 0.2 percentage points higher than expected.
Super Tuesday has set the stage for a November Trump v Biden election rematch. President Biden managed to win all 15 Democrat primaries, while Trump managed 14 wins, losing Vermont to Nikki Haley. Haley has now dropped out of the race leaving Former President Trump as the lone candidate for the Republican nomination. President Biden also delivered his State of the Union Address Thursday evening, engaging in some political point scoring while discussing key economic issues. These included Inflation with the President assuring a soft landing scenario, alongside China, current export restrictions, and the domestic tech sector.
The S&P 500 ($SPX) looked to close the week at new all-time highs, but momentum was halted on Friday by a tech sell-off, causing the three major indexes to close down. Midweek trading was largely driven by positive reactions to Fed Chair Powell’s testimony as mentioned above, as the market continues pricing in June rate cuts. The direction of next week's activity will likely depend on the ability of tech sector shares to recover on Monday.
Europe
Mainland European index activity was somewhat muted earlier in the week benefiting from a number of economic catalysts, including the UKs Spring Budget and Thursday’s ECB monetary policy decision. The ECB held the main refinancing rate at 4.5%, in line with analyst expectations. Additionally, the ECB announced revisions to their FY24 inflation target, lowering estimates to 2.3%, which has increased optimism amongst market participants of upcoming rate cuts.
The FTSE 100 (FTSE) traded higher throughout the week, as traders capitalised on Wednesday’s albeit relatively unsurprising Spring Budget. UK FY24 growth projections provided a small upward shock, with new estimates sitting above expectations. The Chancellor also spun a generally optimistic narrative toward the future of UK equity markets. Positive sentiment was short lived, as the FTSE experienced a sell-off on Friday. Index losses were led by Entain PLC, which has seen a 5-day share price decline of 17.91%, as international governing bodies enforce stricter regulation on the gambling sector. Additionally, traders appeared to increase their bets on banks, as collectively, over 225 million London-listed shares of Lloyds, Barclays and HSBC changed ownership through the session.
Rest of the World
The Shanghai Stock Exchange Composite Index (¥SSE) experienced a stronger week of trading, closing up 0.64% as the Chinese government, alongside regulators, and economists work to limit the fallout from the collapse of stricken property developer Evergrande, while navigating vast equity market outflows, and poor GDP growth performances.
The Nikkei 225 (¥N225) had a slower week, possibly due to concerns over a BOJ monetary policy pivot and a stronger Yen. Tokyo area CPI rose to 2.5%, prompting speculation that the BOJ may change interest rate strategies from negative to higher rates to contain inflation. Higher rates imply economic slowdown as borrowing costs increase, negatively impacting Nikkei performance. Additionally, a stronger Yen, driven by higher demand in the Japanese bond market is unfavourable for traders who require Yen to purchase Japanese domiciled equities.
Cryptocurrencies
Cryptocurrency markets have dominated headlines since the launch of Bitcoin ETFs earlier this year. During this week, Bitcoin broke all-time highs, while the second largest cryptocurrency, Ethereum has continually broke 52-week highs. Additionally, investors seem to have turned to smaller ‘altcoins’ in order to magnify their capital gains.
Positive cryptocurrency performance has also propelled the performance of so called ‘crypto-stocks’ the most notable being the US domiciled Coinbase Global Inc Exchange, and Michael Saylor’s MicroStrategy. Coinbase ($COIN) shares rose 17.88% this week, as investors acknowledge the merits of the commission based exchange model, which is generating higher revenues due to a spike in transaction volume. MicroStrategy ($MSTR) hold upwards of 190,000 Bitcoin and therefore benefit directly from increases in price of the asset, company shares rose 18.94% during the last trading week. A valid question remains over the value of these firms, if the crypto market was to experience sell-offs, similar to those of 2021, which saw trading volumes amongst retail investors dwindle, and asset prices tumble.
Bitcoin has performed well, with prices rising 9.87% from Monday evening, reaching $69,091.76 on Friday at 9pm (GMT). During Friday trading, prices broke all-time highs, a level marginally above $70,000. This marks a significant recovery from Tuesday, when intense selling pressure forced prices below $62,000. Investor conviction remains strong, as ETF inflows increase, and the ‘halving’ approaches.
Commodities
Gold markets have responded positively to this week’s economic data prints. Between 9pm (GMT) Monday and 9pm Friday, Gold prices rose 3.85% from $2,126 to $2,183.90. Friday also marked a record close for the precious metal. Gold directly benefits from a decrease in interest rates, as the opportunity cost of holding the asset decreases as bond yields falls. Additionally, lower interest rates reintroduce controlled inflation into an economy, which for many, Gold acts as a hedge against due to factors such as its finite supply and safe-haven status.
Crude prices have fallen 2.51% between 9pm (GMT) Monday to the same time Friday. OPEC+ announced the extension of production cuts to June, a supply side shock that pushed prices up on Monday. Meanwhile, geopolitical tensions have continued to raise eyebrows. On Tuesday an Israeli official announced the nation may have to act on Hezbollah threats in Lebanon. Further escalations to fighting poses continued risks to oil production and trade flows across the region. Crude also suffered demand side shocks as emerging market consumption fell forcing prices down on Friday, the blip in demand balancing the weeks earlier supply side shock.
What to Watch Next Week
Saturday 9th March - Chinese CPI (YoY)
Sunday 10th March - Japanese GDP (QoQ)
Tuesday 12th March - US CPI (MoM, YoY)
Wednesday 13th March -
UK GDP (MoM)
US Crude InventoriesThursday 14th March - US PPI (MoM)
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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