The US labor market is cooling. ECB officials talked about cutting rates in the spring :: InvestMacro

By JustMarkets

At Friday’s stock market close, the Dow Jones Index (US30) decreased by 0.18% (for the week -0.63%). The S&P 500 Index (US500) was down 0.65% (for the week -0.14%). The NASDAQ Technology Index (US100) closed negative 1.16% (for the week -1.10%).

Although the US economy added 275K jobs, unemployment jumped to 3.9%, and wage growth slowed. The data indicates that the labor market has begun to cool down. Investors’ first reaction to the report was a rise in risk assets and a fall in the dollar. Market expectations for the first rate cut in June were confirmed and strengthened. But since this is not a new scenario and such a consensus has been priced in over the past month, the positivity was not enough for long, and investors sold off all the growth by the end of Friday. Current market conditions suggest index weakness will continue this week as investors take profits after the recent market rally. That said, this week promises to be even more volatile with the release of inflation data on Tuesday, March 12, and the quarterly derivatives expiration on Friday. Usually, these periods are when new trends are born, or old trends are reversed.

Also on Friday, shares of Nvidia (NVDA) fell more than 5%, its worst single-day performance since late May. But the stock ended the week up more than 6% amid a rally that has boosted its market value by more than $1 trillion this year.

Bitcoin hit a new all-time high above $70,000, helped by investor demand for new US spot bitcoin ETFs launched this year and expectations of lower global interest rates. Billions of dollars have poured into ETFs over the past few weeks. Also, let’s not forget the bitcoin “halving” that will take place in April 2024. In addition, the market has received support ahead of an expected upgrade to the Ethereum blockchain platform. Bitcoin’s previous boom in 2021 was followed by a “crypto winter” when bankruptcies and collapses of major cryptocurrency companies left millions of investors destitute, prompting regulators to step up regulation.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) was down 0.16% (for the week +0.40%), France’s CAC 40 (FR40) added 0.15% (for the week +1.18%) on Friday, Spain’s IBEX 35 (ES35) was down 0.13% (for the week +2.34%), and the UK’s FTSE 100 (UK100) closed negative 0.43% (for the week -0.30%).

Nagel, representative of the ECB Governing Council and President of the Bundesbank, said on Friday that an interest rate cut before the summer is increasingly likely. His colleague, ECB Governing Council representative Villeroy de Gallo, added that the first rate cut is very likely to come in the spring.

Oil prices closed 1% lower on Friday as markets remain wary of weak demand from China, even as the OPEC+ producer group extended supply cuts. Both benchmarks fell for the week, with Brent down 1.8% and WTI crude prices decreased by 2.5%. Currently, traders in the energy market are focusing on the timing of possible rate cuts by the Fed and ECB. Lower interest rates may increase demand for oil by accelerating economic growth.

Asian markets traded yesterday without any unified dynamics. Japan’s Nikkei 225 (JP225) was down 1.28% for the week, China’s FTSE China A50 (CHA50) lost 0.28% for the 5 trading days, Hong Kong’s Hang Seng (HK50) was down 1.66% for the week, and Australia’s ASX 200 (AU200) was positive 1.31%.

Japan’s economy returned to growth in the fourth quarter of 2023, averting a technical recession. Revised data showed that the country’s GDP grew by 0.4% and 0.1% year-on-year and 0.1% quarter-on-quarter, respectively, reversing preliminary contraction figures of 0.4% and 0.1% for the period. The latest data reinforced speculation that the Bank of Japan may start raising interest rates in April.

Chinese consumer prices rose by 0.7% year over year in February 2024, above market forecasts of 0.3%, and a turnaround from the sharpest 0.8% drop in 14 years in January. The latest result was the first consumer inflation since August last year, reaching the highest level in 11 months. But despite the rise in consumer prices, producer prices remain in deflation.

S&P 500 (US500) 5,123.69  −33.67 (−0.65%)

Dow Jones (US30) 38,722.69 −68.66 −0.18%)

DAX (DE40) 17,814.51 −28.34 (−0.16%)

FTSE 100 (UK100) 7,659.74 −32.72 (−0.43%)

USD Index 102.74 −0.08 (−0.08%)

Important events today:

• – Japan GDP (q/q) at 01:50 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.