Market Talk – February 21, 2024

ASIA:

Japan’s economy has unexpectedly contracted, leading to a recession and causing it to drop from the world’s third-largest economy to the fourth, behind Germany. The Gross Domestic Product (GDP) shrank by an annualized 0.4% in the last quarter of 2023, following a 3.3% contraction in the previous quarter, which defines a recession. This decline is much lower than the forecasted 1.4% growth. Weak domestic demand, especially in consumer spending, contributed to the economic downturn, while only external demand, represented by exports, made a positive contribution. Private consumption, constituting half of the economy, declined by an annualized 0.9% in the fourth quarter, marking the third consecutive quarter of falls. Rising prices for food, fuel, and other goods were cited as factors affecting Japanese consumers.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 decreased 101.45 points or -0.26% to 38,262.16
• Shanghai increased 28.23 points or 0.97% to 2,950.96
• Hang Seng increased 255.59 points or 1.57% to 16,503.10
• ASX 200 decreased 50.60 points or -0.66% to 7,608.40
• Kospi decreased 4.48 points or -0.17% to 2,653.31
• SENSEX decreased 434.31 points or -0.59% to 72,623.09
• Nifty50 decreased 141.90 points or -0.64% to 22,055.05

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.00087 or -0.13% to 0.65393
• NZDUSD increased 0.0005 or 0.08% to 0.61670
• USDJPY increased 0.314 or 0.21% to 150.304
• USDCNY increased 0.00116 or 0.02% to 7.20166

The above data was collected around 13:23 EST.

Precious Metals:

• Gold increased 0.56 USD/t oz. or 0.03% to 2,024.09
• Silver decreased 0.151 USD/t. oz or -0.66% to 22.813

The above data was collected around 13:28 EST.

EUROPE/EMEA:

The European Central Bank (ECB) is urging banks to enhance their management of outsourcing risk, particularly in the processing of personal data, as part of its 2024 supervisory priorities. The ECB emphasizes the need for institutions to address vulnerabilities arising from increased reliance on third-party providers, considering the growing complexity of supply chains and potential concentration risks. The central bank has highlighted findings from a 2023 data collection exercise, revealing a significant rise in outsourcing contracts and budget allocations for critical functions. Despite an increasing number of EU-based service providers, more than 30% of significant banks’ total outsourcing budget is concentrated on ten providers, most of which are headquartered outside the EU.

The major Europe stock markets had a mixed day today:

• CAC 40 increased 16.87 points or 0.22% to 7,812.09
• FTSE 100 decreased 56.70 points or -0.73% to 7,662.51
• DAX 30 increased 49.69 points or 0.29% to 17.118.12

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00067 or 0.06% to 1.08097
• GBPUSD increased 0.00044 or 0.03% to 1.26224
• USDCHF decreased 0.00134 or -0.15% to 0.88046

The above data was collected around 13:31 EST.

US/AMERICAS:

The minutes of the Federal Open Market Committee (FOMC) meeting held on January 30–31, 2024, revealed a cautious approach to lowering interest rates. The committee expressed concern about the uncertainty in the economic outlook and the unexpected level of inflation, which was running higher than anticipated and well above the Fed’s 2% target. The discussion also touched on the reduction of the Fed’s bond holdings and the need for a more in-depth conversation at the March meeting. While some officials indicated a patient approach towards loosening monetary policy, the committee emphasized the importance of gaining greater confidence in sustaining inflation towards the 2% target before considering rate cuts.

In January, Canada’s economy added 37,000 jobs, marking a small decline in the unemployment rate that stands at 5.7%. This decline, the first since December 2022, was driven mainly by an increase in part-time work, as 12,000 full-time jobs were lost. Average hourly wages rose by 5.3% from a year ago. The job gains were observed in several sectors, including wholesale and retail trade, finance, insurance, real estate, rental, and leasing. However, the accommodation and food services sector saw a decline in employment. The report suggests that the Bank of Canada may not rush to cut interest rates due to the positive job gains and wage growth.

US Market Closings:

• Dow advanced 48.44 points or 0.13% to 38,612.24
• S&P 500 advanced 6.29 points or 0.13% to 4,981.8
• Nasdaq declined 49.91 points or -0.32% to 15,580.87
• Russell 2000 declined 9.4 points or -0.47% to 1,994.74

Canada Market Closings:

• TSX Composite decined 45.15 points or -0.21% to 21,172.38
• TSX 60 declined 3.83 points or -0.3% to 1,278.68

Brazil Market Closing:

• Bovespa advanced 115.47 points or 0.09% to 130,031.58

ENERGY:

The oil markets had a mixed day today:

• Crude Oil increased 0.473 USD/BBL or 0.61% to 77.513
• Brent increased 0.467 USD/BBL or 0.57% to 82.807
• Natural gas increased 0.1988 USD/MMBtu or 12.61% to 1.7748
• Gasoline increased 0.0174 USD/GAL or 0.76% to 2.2948
• Heating oil decreased 0.0315 USD/GAL or -1.15% to 2.7000

The above data was collected around 13:33 EST.

• Top commodity gainers: Natural Gas (12.61%), Coffee (3.71%), Cocoa (4.97%) and Rhodium (2.82%)
• Top commodity losers: Coal (-3.85%), Platinum (-2.01%), Orange Juice (-2.62%) and Palladium (-2.68%)

The above data was collected around 13:38 EST.

BONDS:

Japan 0.724% (-0.7bp), US 2’s 4.65% (+0.041%), US 10’s 4.3167% (+4.17bps); US 30’s 4.48% (+0.033%), Bunds 2.451% (+8.1bp), France 2.933% (+8.4bp), Italy 3.958% (+9.3bp), Turkey 24.02% (+45bp), Greece 3.423% (+6.2bp), Portugal 3.049% (+0.9bp); Spain 3.376% (+9.5bp) and UK Gilts 4.097% (+5.4p)

The above data was collected around 13:42 EST.