Forex News from InstaForex

[IFX Gertrude]

S&P 500 on the finish line: the impact of US earnings and interest rates



S&P 500: Slow gains amid expectations of interest rate changes

Tuesday brought modest gains in the S&P 500, where investors were scrupulously analyzing mixed reports from U.S. giants and evaluating statements from Fed officials looking at hints of an upcoming interest rate cut.

Minneapolis FRB head Neel Kashkari emphasized that the fight against inflation is not over, but noted its accelerating decline, pointing to data that has been largely in line with the Fed's 2% target over the past three and six months.

FRB Cleveland Chairman Loretta Mester expressed the view that a rate cut is possible under favorable developments, although she did not go into details of possible policy easing due to uncertainty around inflation.

Dynamics of shares and sectoral changes of the market

Equity dynamics were erratic throughout the day but recorded gains towards the close.

The Dow Jones Index (.DJI) jumped 141.24 points, or 0.37%, to 38,521.36. The S&P 500 (.SPX) strengthened 11.42 points, or 0.23%, to 4,954.23, while the Nasdaq Composite (.IXIC) rose 11.32 points, or 0.07%, to close at 15,609.00.

On Tuesday, U.S. Treasury Secretary Janet Yellen expressed concern about tensions in the banking sector and among commercial real estate owners, but emphasized that with the help of regulators, the situation remains under control.

The KBW Regional Banks Index (.KRX) ended the day down 1.4%, marking a 12.6% decline over the past six trading sessions. Shares of New York Community Bancorp (NYCB.N) collapsed 22.2% after the bank reported an unexpected quarterly loss due to real estate debt forgiveness for some customers, losing about 60% of its value for the week.

Meanwhile, airline stocks pushed the Dow Jones Transportation Average (.DJT) index up 2.1%, pointing to the demand for air travel. Frontier Group Holdings (ULCC.O) delighted the market by jumping 20.8% thanks to reporting reaching breakeven.

According to LSEG, more than half of the companies in the S&P 500 have already reported earnings that beat expectations 81.2% of the time. Total S&P 500 fourth-quarter earnings are projected to be up 8.1% from a year ago.

GE HealthCare Technologies (GEHC.O) rose 11.6% after posting quarterly earnings that beat expectations, fueling record gains in the healthcare sector of the S&P 500 Index (.SPXHC).

The materials sector (.SPLRCM) posted the best performance of any S&P 500 sector.

The MSCI Global Index (.MIWD00000PUS), which reflects stocks in 49 countries, rose 0.51%.

Shares of chemical giant DuPont de Nemours (DD.N) jumped 1.7%, up 7.4% after the company beat quarterly profit forecasts and also announced a $1 billion share repurchase program and a dividend hike.

Palantir Technologies (PLTR.N) soared 30.8% in anticipation of an upbeat full-year earnings forecast.

Meanwhile, shares of Eli Lilly (LLY.N) are down 0.2% despite a 2024 earnings forecast that exceeds expectations.

Shares in the semiconductor segment added to the tension on the Nasdaq Technology Market, with the Philadelphia SE Semiconductor index (.SOX) down 1%. Rambus Inc (RMBS.O) was at the epicenter of the decline, losing 19.2% after posting quarterly results.

On NYSE actively growing stocks outperformed falling ones, demonstrating a ratio of 2.6 to 1. There were 190 new highs versus 64 new lows on this floor.

The Nasdaq showed 2,721 stocks went up and 1,476 went down, with rising issues outnumbering falling ones by a ratio of 1.8 to 1. The S&P 500 marked 27 new 52-week highs versus 8 new lows, while the Nasdaq recorded 110 new highs and 122 new lows.

Total trading volume on U.S. exchanges reached 11.21 billion shares, compared with the usual average of 11.54 billion over the past 20 sessions.

Strengthening Chinese stocks and the international market

In China, authorities have taken to strengthening its stock market, leading Chinese blue chip stocks (.CSI300) to climb more than 3%. In New York, the iShares China Large-Cap ETF (FXI.P) rose 5.7% and the Golden Dragon China Index (.HXC) jumped 5.9%.

A series of statements from China's financial markets regulator and President Xi Jinping's upcoming meeting with regulators indicated Beijing's determination to combat losses in the domestic market.

State-owned investment fund Central Huijin Investment announced it is expanding its investment in ETFs.

China's blue chips hit a five-year low last week amid a slowing economy, prompting state investors, known as the "national team," to step up purchases of ETFs tracking shares of leading companies to support the market.

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[IFX Gertrude]

Global challenges: rising oil prices in response to the Gaza crisis and data from the United States



On Thursday, oil prices surged more than 3% due to concerns about the potential expansion of conflict in the Middle East after Israel rejected a ceasefire offer from HAMAS.

The price of Brent crude oil increased by $2.42 to $81.36 per barrel, while West Texas Intermediate crude rose by $2.36 to $76.22 per barrel. As a result, the cost of Brent surpassed the $80 mark, and WTI exceeded $75 per barrel for the first time in February.

The escalation of the situation affects the rise in oil prices, with Brent and WTI prices expected to increase by more than 5% over the week.

"We are watching further developments, assessing potential consequences," said John Kilduff from Again Capital LLC, highlighting the impact of attacks by Houthi rebels supported by Iran on global oil trade.

For peace agreement discussions, HAMAS representatives arrived in Cairo, where they met with Egyptian and Qatari mediators.

A stronger-than-expected decrease in US gasoline and distillate inventories also supported oil prices.

Aker BP reported that production at the Johan Sverdrup field, the largest in the North Sea, would be maintained at 755,000 barrels per day until the end of the year, exceeding the initially planned 660,000 barrels per day.

According to UBS analyst Giovanni Staunovo, the demand for oil remains high among the largest consumers, including India and the US.

The US Department of Labor reported a decrease in unemployment claims, indicating the labor market's underlying strength.

IG analyst Tony Sycamore expressed that deflation risks in China, the world's largest crude oil importer, are pressuring global oil prices.

"The decline in oil prices in Asia is largely related to recent challenges in the Chinese stock markets and the unexpected consumer price index figure, undermining confidence ahead of the Lunar New Year," he added.

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[IFX Gertrude]

US yield data raises stakes: global equities back on top



The global stock index MSCI All Country (.MIWD00000PUS) increased by 0.4%, marking its third consecutive weekly gain.

The S&P 500 index closed above 5000 for the first time on Friday, and Nasdaq briefly traded above 16,000, thanks to growth from large corporations and chip manufacturers, including Nvidia, as investors focused on artificial intelligence technologies and expected high profits.

Shares of Nvidia (NVDA.O) jumped 3.6%, reaching a record high after Reuters reported the creation of a new business unit focused on developing specialized chips for cloud computing companies and others, including advanced AI processors.

This followed a Wall Street Journal report that OpenAI CEO Sam Altman was negotiating with investors to fund a technology initiative aimed, among other things, at increasing chip production for powerful artificial intelligence.

"So far, the AI story has been about building infrastructure, chips, and data centers," said David Lefkowitz, head of US equities at UBS Global Wealth Management, adding that it "highlights potentially huge demand for AI infrastructure in the future."

Besides the 1.99% increase in the Philadelphia Semiconductor Index, contributions were also made by technology giants, including Microsoft (MSFT.O), Amazon.com (AMZN.O), and Alphabet (GOOGL.O), to index profit.

According to LSEG data, with results from about two-thirds of S&P 500 companies, Wall Street's earnings growth expectations for the fourth quarter are now 9.0% compared to 4.7% at the start of January, with 81% of companies exceeding estimates compared to an average of 76% over the last four reporting periods.

Strong corporate earnings, positive employment data, GDP, and decreasing inflation create a favorable backdrop for further stock market development.

Consumer prices in the US for December rose less than initially expected, but core inflation remained somewhat high, as data released on Friday showed. The data revision changed little in the expectations for changes in the Federal Reserve's rates.

Inflation data for the US in January is expected next week.

The Dow Jones Industrial Average (.DJI) fell by 54.64 points, or 0.14%, to 38,671.69, the S&P 500 (.SPX) added 28.70 points, or 0.57%, to 5,026.61, and the Nasdaq Composite (.IXIC) grew by 196.95 points, or 1.25%, to 15,990.66.

Positive earnings and optimism regarding artificial intelligence helped the S&P 500 index achieve ten intra-day record highs this year.

Nasdaq closed just 0.4% below its record closing high of 16,057.44, registered in November 2021.

Over the week, all three indices recorded their fifth consecutive weekly gain: S&P rose by 1.4%, Nasdaq by 2.3%, and Dow by 0.04%.

Earlier data showed that consumer prices in the US for December rose less than initially expected, but core inflation remained somewhat high - a mixed picture that clouded expectations regarding the timing of the Federal Reserve's interest rate cuts.

Strong economic data and recent comments from Federal Reserve officials dispelled hopes that the central bank would start cutting interest rates in March.

Market participants are waiting for consumer price data for January next week to get more clues about when the Fed will reduce borrowing costs.

It's also worth noting that shares of Cloudflare (NET.N) rose by 19.5%, as optimistic revenue and profit forecasts for the first quarter were expected. However, shares of PepsiCo (PEP.O) fell by 3.6% after its fourth-quarter revenue fell short of estimates, as multiple price increases reduced demand for its juices and Lay's chips.

Shares of Pinterest (PINS.N) fell by 9.5% after the company forecasted first-quarter revenue significantly below Wall Street estimates.

The yield on benchmark 10-year US Treasury notes rose by 0.7 basis points to 4.177% from 4.17% late on Thursday.

The yield on 2-year notes, which typically moves in step with interest rate expectations, increased by 3.2 basis points to 4.4883% from 4.456%.

Gold prices were pressured by higher yields: spot gold fell by 0.44% to $2024.16 per ounce. Futures on American gold decreased by 0.4% to $2038.7.

Futures on Brent crude oil increased by 0.7% to $82.19 per barrel, while futures on American oil rose by 0.8% to $76.84.

European stocks closed slightly lower under the influence of rising yields and falling shares of L'Oreal.

The pan-European STOXX 600 index closed down by 0.1%, but still showed a weekly gain of 0.2%.

Shares of L'Oreal fell by 7.6% after the French cosmetics company reported unsatisfactory sales growth in the last quarter.

Inflation in Germany, Europe's largest economy, fell in January to 3.1%, fueling bets on when the European Central Bank will start cutting interest rates.

However, the yield on eurozone bonds reached a multi-week high after several ECB rate-setters warned against prematurely easing monetary policy.

"Indeed, it now seems entirely evident that the ECB will wait for wage statistics in Europe at the end of April before likely cutting rates in June," said ING.

Japanese stocks reached a 34-year high. The yen recovered after falling to a 10-week low as traders reassessed their bets on how quickly the Bank of Japan might raise rates.

In China, mainland markets were closed, and in Hong Kong, trading was sluggish and ended early, with the Hang Seng index falling by 0.8% amid concerns that authorities might not fulfill promises to support.

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[IFX Gertrude]

Stocks and the dollar: stability vs. growth ahead of key consumer price index



At the start of the week, global market indices remained virtually unchanged, while the US currency slightly strengthened ahead of Tuesday's consumer price index report in the US, which could hint at when the Federal Reserve might begin cutting interest rates.

In the realm of cryptocurrencies, Bitcoin reached $50,000, a level not seen in over two years, with its value increasing by 5.6% to $50,207. Cryptocurrency stocks also saw gains: Coinbase Global (COIN.O) increased by 3.7%.

The S&P 500 index slightly fell after reaching a new intraday record high. Last week, the S&P 500 index surpassed 5,000 points for the first time in history. The MSCI global stock index remained unchanged after reaching its highest level since January 2022.

The January report on the consumer price index is expected on Tuesday, with the US producer price report to follow later in the week. Investors are also eagerly awaiting the January US retail sales report, set for release on Thursday.

Initial expectations of a Fed rate cut at the upcoming meeting were not met due to data indicating the economy remains stable.

Market estimates put the likelihood of rates staying unchanged in March at 84.5%. According to CME FedWatch Tool data, the chance of a rate cut of at least 25 basis points in May dropped to 61% from over 95% at the start of 2024.

"Moderate consumer price index data and soft retail sales should reinforce the Fed's confidence that inflation is returning to its target," said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York.

The Dow Jones Industrial Index (.DJI) rose by 125.69 points, or 0.33%, to 38,797.38, the S&P 500 (.SPX) lost 4.77 points, or 0.09%, to 5,021.84, and the Nasdaq Composite (.IXIC) dropped 48.12 points, or 0.30%, to 15,942.55.

Among the Dow Jones index components, Nike Inc (NYSE:NKE) shares increased by 2.71 points (2.59%) and closed at 107.21. Shares of Goldman Sachs Group Inc (NYSE:GS) went up by 8.63 points (2.25%), finishing at 392.89. Shares of 3M Company (NYSE:MMM) rose by 1.76 points (1.89%), closing at 94.66.

Shares of Salesforce Inc (NYSE:CRM) fell by 3.76 points (1.29%), ending the session at 287.54. Shares of Microsoft Corporation (NASDAQ:MSFT) rose by 5.29 points (1.26%), closing at 415.26, while shares of Apple Inc (NASDAQ:AAPL) dropped in price by 1.70 points (0.90%), finishing trading at 187.15.

Among the S&P 500 index components, shares of VF Corporation (NYSE:VFC) appreciated by 13.92% to 17.43, Diamondback Energy Inc (NASDAQ:FANG) gained 9.38%, closing at 165.98, and shares of Mohawk Industries Inc (NYSE:MHK) increased by 6.61%, ending the session at 117.28. Shares of Motorola Solutions Inc (NYSE:MSI) decreased in price by 3.20%, closing at 320.30.

Shares of ServiceNow Inc (NYSE:NOW) lost 3.19%, ending trading at 786.98. Quotes of Monolithic Power Systems Inc (NASDAQ:MPWR) dropped by 2.98% to 729.87.

Among the NASDAQ Composite index components, shares of Beamr Imaging Ltd (NASDAQ:BMR) surged by 371.56% to 9.95, Renalytix Ai Plc (NASDAQ:RNLX) increased by 228.00%, closing at 1.25, and shares of Millennium Group International Holdings Ltd (NASDAQ:MGIH) rose by 201.94%, ending the session at 3.11.

Shares of AN2 Therapeutics Inc (NASDAQ:ANTX) decreased in price by 74.50%, closing at 5.10. Shares of Medavail Holdings Inc (NASDAQ:MDVL) lost 43.22%, ending trading at 1.80. Quotes of TOP Financial Group Ltd (NASDAQ:TOP) dropped by 40.63% to 3.20.

Shares of Goldman Sachs Group Inc (NYSE:GS) reached a 52-week high, increasing by 2.25%, 8.63 points, and finished trading at 392.89. Shares of Beamr Imaging Ltd (NASDAQ:BMR) reached a historical high, rising by 371.56%, 7.84 points, and ended trading at 9.95. Shares of Medavail Holdings Inc (NASDAQ:MDVL) fell to a 3-year low, losing 43.22%, 1.37 points, and closed at 1.80.

The global stock index MSCI (.MIWD00000PUS), tracking stocks in 49 countries, dropped by 0.01%. European stocks (.STOXX) increased by 0.5%.

Markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia were closed for holidays.

Financial markets in mainland China were closed for the Lunar New Year holiday and will resume trading on Monday, February 19. Trading in Hong Kong will resume on February 14.

Investors also tempered their expectations for a European Central Bank rate cut after two policy makers stated last week that the ECB needs more evidence of inflation falling before it can reduce rates.

On Monday, the Federal Reserve Bank of New York published its January survey of consumer expectations, which showed that inflation expectations for one year and five years remained unchanged at 3% and 2.5%, respectively. The predicted inflation growth over three years fell to 2.4%, the lowest level since March 2020, from December's 2.6%.

The dollar index, which tracks the dollar's performance against a basket of other major trading partners' currencies, increased by 0.1% to 104.13.

The dollar rose by 0.03% against the yen to 149.35, while the euro dropped by 0.1% for the day to $1.0769.

The yield on US Treasury bonds fell, with the rates on benchmark 10-year bonds decreasing after three consecutive periods of growth.

The yield on the benchmark 10-year US Treasury bonds decreased by 1.9 basis points to 4.168% from 4.187% late on Friday.

Oil futures closed mixed, almost unchanged. Concerns over interest rates and global demand caused the market to pause after prices jumped by about 6% last week.

US oil increased by 8 cents and settled at $76.92 per barrel. Brent crude oil decreased by 19 cents and settled at $82.

Spot gold prices fell by 0.3%.

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[IFX Gertrude]

Inflationary explosion in the US: how do the dollar and bonds react?



The consequences of high inflation are felt across the financial market. Specifically, the main Wall Street indices reacted to this news with a decrease after the publication of data indicating a higher than expected rise in consumer prices. This event pressured the expectations regarding the imminent lowering of interest rates, which in turn led to an increase in the yield of US Treasury bonds.

Among other things, the Dow Jones Industrial Average recorded its most significant drop in almost 11 months after the US Department of Labor's report showed an unexpected increase in consumer prices in January, especially due to the rise in housing costs.

Against this backdrop, market indices, which were on the rise in anticipation that the Federal Reserve System (FRS) would begin to lower rates as early as May, showed negative dynamics. The S&P 500 index, for example, closed above the 5000 point mark for the first time, and the Dow Jones index traded near record-high values. However, the publication of inflation data revised expectations regarding the FRS's policy, increasing the likelihood that rate cuts may not occur until June.

Mega-cap companies sensitive to rates, such as Microsoft, Alphabet, Amazon.com, and Meta Platforms, showed a decrease in stock prices amid the rise in yields of US Treasury bonds to a two-month high. A similar situation was observed among chip manufacturers, including Micron Technology, Qualcomm, and Broadcom, which led to a 2% drop in the Philadelphia SE Semiconductor index.

The real estate, consumer discretionary, and utilities sectors faced the most significant losses among the 11 major industry indices of the S&P 500, especially real estate, which reached its lowest values in more than two months.

Small-cap companies also felt the pressure, with the Russell 2000 index showing the most significant daily drop since June 2022.

"Various statements by Federal Reserve System officials in recent weeks have indicated that the market-anticipated rate cuts in the first half of the year might have been premature. The latest consumer price index data certainly confirms this trend," commented Bob Elliott from Unlimited Funds.

The consumer inflation data followed a modest revision of inflation figures for the last quarter of 2023, giving investors temporary relief regarding inflation expectations.

The Cboe Volatility Index reached its highest level since November, highlighting the growing market concern. The S&P 500 and Nasdaq Composite indices lost 1.37% and 1.79% respectively, while the Dow Jones Industrial Average fell by 1.36%, marking its most significant decline since March 2023.

Among other developments, JetBlue Airways shares surged by 21.6% after Carl Icahn disclosed his stake in the company, calling the shares "undervalued." Arista Networks' shares declined by 5.5% following a gross profit forecast below expectations, and Marriott International lost value after forecasting annual earnings below analyst expectations.

Cadence Design Systems and toy manufacturer Hasbro also faced a drop in share value after publishing gloomy forecasts. Meanwhile, Tripadvisor shares jumped by 13.8% following the announcement of the creation of a special committee to review deal proposals.

The total trading volume on US exchanges reached 12.9 billion shares, comparable to the average of the last 20 sessions at 11.71 billion shares.

The US stock market continues to demonstrate record levels, supported by leading technology companies and expectations of Federal Reserve rate cuts. The global stock index MSCI and the Stoxx 600 European index also showed a decline amid current events.

The dollar index reached a three-month high, and bitcoin set a new record since December 2021, despite subsequent declines.

Data on US retail sales and the producer price report are expected shortly, which may further influence market sentiments.

The rise in oil prices continues amid tensions in the Middle East and Eastern Europe, with Brent crude futures and West Texas Intermediate showing significant increases. Meanwhile, gold prices fell below the key level of $2000 per ounce after the CPI data was released, reaching a two-month low.

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[IFX Gertrude]

Intraday Price Movement of Litecoin Cryptocurrency, Friday February 16 2024

If we look at the 4-hour chart of the Litecoin cryptocurrency, we can see a Bearish 123 pattern followed by the apperance of a Bearish Ross Hook (RH) pattern and a Rising Wedge pattern, all of which confirms that in the near future Litecoin has the potential to weaken down to level 68.16. If this level is successfully broken downwards then Litecoin will have the potential to continue weakening to level 66.45, but if on its way down there suddenly occurs an upward correction which breaks above level 72.93 then all the decline scenarios that have been described previously will automatically cancel themselves.

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[IFX Gertrude]

Gold and oil raise rates

In Asian markets on Tuesday, gold prices remained within a narrow range amid fears of long-term interest rate hikes. The absence of trading signals was also due to a holiday in the American market.

Gold demonstrated some strengthening, reaching the $2000 per ounce mark after recovering from a two-month low over the last two trading sessions. However, current fluctuations in gold prices are still occurring within the range of $2,000-$2,050, which was established for the majority of 2024.

Spot gold prices increased slightly by 0.1% to $2,019.17 per ounce, while the price of gold futures expiring in April settled at $2,030.20 per ounce as of 23:34 Eastern Time.

Analysts from Citibank highlight three main catalysts that could push gold prices to $3000 per ounce and oil to $100 per barrel in the next 12-18 months. Among them are a sharp increase in gold purchases by central banks, stagflation, and a deep global recession. Currently, gold is trading around the $2016 mark and could rise by approximately 50% in the event of any of these scenarios materializing.

Analysts point to dedollarization in central banks of developing countries as the most likely path to reaching $3000 per ounce of gold. This would lead to a doubling of gold purchases by central banks and shift the focus of demand from jewelry to gold as the main driver. Central bank gold purchases have reached record levels in recent years, aiming to diversify their reserves and reduce credit risk. Leading this trend are the central banks of China and Russia, as well as India, Turkey, and Brazil, actively increasing their gold bullion purchases. According to the World Gold Council, global central banks have maintained a level of net gold purchases exceeding 1000 tons for two consecutive years.

In the context of a global recession, a deep economic downturn could force the United States Federal Reserve to drastically cut rates, which, in turn, could be the reason for gold prices to rise to $3000. Gold traditionally exhibits an inverse correlation with interest rates, becoming a more attractive asset compared to fixed income in a low-rate environment.

Stagflation, combining high inflation with economic slowdown and rising unemployment, could also trigger a rise in gold prices, despite the low likelihood of such a scenario. Gold is perceived as a safe haven in periods of economic instability, attracting investors looking to avoid risks. In addition to the above factors, Citi suggests that the baseline scenario for gold involves reaching a price of $2150 per ounce in the second half of 2024, with an expected average price just over $2000 per ounce in the first half of the year. Record prices may be achieved by the end of 2024.

Although geopolitical tensions in the Middle East provide support for gold prices, a more significant price increase is restrained by the prospect of long-term interest rate hikes in the US.

Traders are lowering expectations regarding the Federal Reserve's imminent rate cuts following reports of high inflation in the US, and statements from Fed officials reinforce assumptions about maintaining high interest rates over a longer period.

The outlook for gold in the near future remains uncertain, similar to the situation in the market for other precious metals. Prices for platinum and silver show a decline, and copper experiences a slight drop in price, despite a reduction in the base interest rate in China, the largest importer of the metal.

In the context of the oil market, analysts consider a scenario where oil prices could once again reach $100 per barrel, considering risks associated with geopolitical tensions, actions by OPEC+, and possible supply disruptions from key oil-producing regions. Tensions in the Middle East, particularly the conflict between Israel and Hamas, and increasing tension on the border between Israel and Lebanon highlight potential risks for oil suppliers in the OPEC+ region.

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[IFX Gertrude]

Nikkei Hits New Highs: How Nvidia Became the Driving Force Behind the Semiconductor Industry's Growth



A landmark milestone was recorded in the Japanese stock market on Thursday: the Nikkei average breached the threshold set in December 1989, thanks to a significant rise in the share prices of companies operating in the microelectronics sector. This leap was driven by the superior earnings forecasts of American chip giant Nvidia, surpassing market expectations.

The Nikkei index reached 39,029.00, updating the historical high of 38,957.44 set on the last trading day of 1989, when the Japanese economy was at the peak of the "bubble." This was made possible by low asset valuations and corporate reforms, which attracted the attention of foreign investors looking for alternatives to weakening Chinese markets. Since January 2023, the index has jumped by 52%, showing impressive growth.

It took 34 years to recover from the downturn, a record period for a major market, surpassing Wall Street's recovery from the Great Depression by ten years.

To date, the index has shown a growth of almost 17% after a 28% increase in 2023, leading among major Asian exchanges. While the Nasdaq technology index grew by 43% last year and by 6% this year.

The Nikkei rally successfully resists recession in Japan, military conflicts in Europe and the Middle East, global inflationary pressure, and rising interest rates worldwide. Trading activity and a weak national currency contributed to increased exporter revenues, protecting the market from a decline in domestic demand.

The implementation of corporate reforms in Japan, including share buybacks and reduction of cross-shareholdings, as well as foreign investments such as Warren Buffet's significant investments in 2020, highlighted the attractiveness of valuations and contributed to the rally. Last year, the Japanese stock market received 6.3 trillion yen ($42 billion) in foreign investments, and in January of this year, 1.16 trillion yen.

The success of the Japanese market at the beginning of 2024 was also due to a strong earnings season, a drop in the yen's value, and expectations that the Bank of Japan will continue its ultra-loose monetary policy. Analysts raised their year-end forecasts from 35,000 to 39,000, noting the potential for further growth.

Comparing the current market situation to the boom of the 1980s and the subsequent crash, which led to a prolonged period of deflation, there is no fear of a new crisis today, as inflation is controlled at just over 2%, and company incomes continue to grow.

Companies like Fast Retailing Co (owner of Uniqlo), chipmakers Advantest Corp and Tokyo Electron have become the backbone of the current rally, unlike past decades when bank and real estate stocks were in focus.

The growth of the Japanese market is also supported by robust corporate reforms and opportune timing for growth amidst a downturn in China. While the Nikkei index is on the rise, indexes in Hong Kong and China are experiencing a downturn, attracting investments to Japan.

Corporate cash reserves and household savings in Japan also have the potential to stimulate stock price growth, encouraging their entry into the market.

A 6% increase in Nvidia shares after a revenue forecast exceeding expectations highlighted the company's steady demand for chips, becoming a key factor for the market. Shares of Tokyo Electron and Advantest, along with other companies in the microelectronics sector, showed significant growth, contributing to the overall success of the Nikkei index and demonstrating a healthy dynamic in the industry.

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[IFX Gertrude]

THE MARATHON CONTINUES: S&P AND DOW SET NEW RECORDS, NVIDIA STOCK KEEPS UP ITS MOMENTUM



According to the FedWatch Tool by CME Group, Fed funds futures show a 52.6% probability of rate cuts in June and a 35.5% probability of keeping them at current levels, which is a sharp change compared to the probability of cuts in March, which stood at 62%.

The pan-European STOXX 600 index (.STOXX) rose by 0.43%, continuing its fifth consecutive week of gains and reaching a new record closing level. The French CAC40 index (.FCHI) and the German DAX index (.GDAXI) also closed at new record levels. The dollar is poised for its biggest weekly decline in 2024 as investors slow their pace and await further cues regarding the global economy.

The dollar index increased by 0.029%, while the euro decreased by 0.03% to $1.082.

Regarding European data, sentiment among German businesses in the largest economy in Europe unexpectedly declined in December, according to a survey by the Ifo Institute.

Yields on German bonds continue to rise for the third consecutive week as economic data and statements from central bank officials undermine investors' hopes for a swift interest rate cut by the European Central Bank this year.

The Japanese stock market was closed due to a holiday on Friday, but Nikkei futures rose by almost 1%, suggesting that Japanese stocks will continue their record growth next week.

Chinese stocks fluctuate between gains and losses. The Shanghai Composite index (.SSEC) rose above the key psychological level of 3,000 points. For the week, it rose by 4.6%, climbing approximately 10% from a five-year low set over two weeks ago.

The Hang Seng index (.HSI) in Hong Kong fell by 0.1%.

Data released on Friday showed that new home prices in China declined in January for the seventh consecutive month, causing instability in sentiment as policymakers' efforts to restore trust in the debt-laden sector are slowly progressing.

The yield on two-year Treasury bonds, reflecting expectations regarding interest rates, fell by 2.2 basis points to 4.692%, while the yield on benchmark 10-year bonds decreased by 7.5 basis points to 4.252%.

10-year bond yields reached a three-month high at 4.3540% overnight. Futures for US crude oil fell by $2.12 to $76.49 per barrel, while Brent crude oil prices dropped by $2.05 to $81.62 per barrel. Gold prices are poised for a weekly gain, thanks to the weakening dollar. Futures for US gold rose by 0.9% to $2049.40 per ounce.

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[IFX Gertrude]

EUR/USD OUTLOOK: DOLLAR MAY FALL INTO BULLISH TRAP

Today's focus is on crucial economic indicators and events that could significantly impact the financial markets. The spotlight is on the US GDP data for the fourth quarter, providing insights into the country's economic performance. Additionally, preliminary statistics on the trade balance for goods and speeches by influential Fed representatives - Bostic, Collins, and Williams - are on the agenda. In the Eurozone, the economic sentiment index for February has been released, offering a comprehensive view of the current economic climate in the region. Looking ahead to the end of February, a meeting of finance ministers and central bank governors from G20 countries is scheduled for the 28th and 29th. This gathering will bring together global financial leaders to discuss key economic issues that could impact financial markets. On Thursday, attention will shift to the core US Personal Consumption Expenditures (PCE) price index, a pivotal measure for assessing inflation. Traders will carefully analyze this data to formulate potential trading strategies as the dollar index fluctuates. In Wednesday's trading, the dollar index regained control at 104.0, despite weak industrial orders data in the United States. Traders are eagerly anticipating new information on inflation, which could hint at the Federal Reserve's possible timeline for interest rate adjustments. The unexpected drop in US consumer confidence to 106.7 points in February, contrary to the expected rise to 115.0, has limited the dollar's strengthening. Additionally, statistics reveal a record monthly decline in new orders for durable goods in January, down 6.1% from December, surpassing analysts' expectations of a 4.5% decline. Bloomberg economists have revised their forecast for US economic growth in 2024 to 2.1%, reducing the likelihood of a recession to 40%. The US economic growth rate, updated on Wednesday, showed a year-on-year increase of 3.2% in the fourth quarter, slightly lower than the 3.3% advance estimate, with the downward revision attributed to rising private sector inventories. The dollar retreated from its intraday high following mixed second US GDP data, emphasizing the market's sensitivity to economic indicators and the potential impact on currency valuations. Technical outlook The dollar index surged, catching some bearish investors off guard. Despite this, the path to a substantial recovery appears challenging, given the hurdles posed by the latest US GDP data and its components. The Federal Reserve, led by Jerome Powell, has consistently emphasized its reliance on economic data. Presently, the data suggests a potential need for further rate hikes, a development conflicting with market expectations. This discrepancy may cool sentiment as the Fed evaluates the extent of potential disappointment. Examining the technical landscape, the 100-day simple moving average (SMA) near 104.00 has been tested, with its resistance being overcome. However, there is a looming risk of a bull trap formation. A breakthrough at 104.60 for the USD would pave the way to the next significant resistance levels at 105.12, followed by 105.88. Looking ahead, a shift in market expectations for a delayed Fed rate cut until late 2024 could bring the 2023 high at 107.20 back into relevance. In the face of sustained selling pressure, support may weaken, potentially leading to further declines to 103.16, marked by the 55-day SMA, before testing the crucial level of 103.00. Monitoring these technical and fundamental factors is essential for a comprehensive assessment of the dollar's trajectory in the current market environment.

In recent developments, it's notable that negotiations in the US Congress aimed at preventing a government shutdown and providing assistance to Ukraine, Israel, and Taiwan did not yield an agreement between Republicans and Democrats. The potential for a government shutdown looms, which could trigger a decline in risk asset markets while bolstering the position of the dollar. Market sentiment is also influenced by the anticipated likelihood of a 25 basis point Fed rate cut to 3% at the March meeting, with a 21% chance of a similar decision at the April-May meeting. On the international front, Germany, France, and Spain are set to report inflation data on Thursday, preceding eurozone statistics scheduled for Friday. ECB officials remain cautious about rapidly easing monetary policy in the eurozone. Christine Lagarde highlighted stable wage growth in the region, and Yiannis Stournaras from the ECB's executive board ruled out interest rate cuts before June. In Germany, the GfK consumer sentiment index continues to show negative readings, reaching -29.0 in February compared to -29.6 in January. German citizens persist in viewing cost-saving as a prudent strategy in the face of rising prices and more pessimistic forecasts for the national economy this year. Furthermore, lending to households in the eurozone recorded a mere 0.3% year-on-year growth in January, marking the slowest pace since March 2015. This underscores a notable deceleration in economic activity in the eurozone amid ECB rate hikes. Monitoring these diverse factors provides a comprehensive understanding of the dynamic forces shaping the current economic landscape. Euro's weakness The EUR/USD pair declined to the psychological level of 1.0800 amid the dollar's uptrend and deterioration of the consumer sentiment in the euro zone. These signals indicate that the euro's recovery cycle may be completed.

The preceding day saw the currency pair reaching its peak at 1.0866, only to experience a subsequent decline to 1.0813, triggered by a dip in the European Commission's Economic Sentiment Index (ESI) for February to -9.5. This was against the forecast of -9.2 and the previous value of -9.3. The eurozone economy continues to grapple with challenges, and the decrease in economic sentiment indicators suggests that risks lean towards further deterioration in the short term. Although the euro has exhibited growth against the dollar since mid-February, primarily driven by the dollar's weakening due to early-year economic slowdown, the latest sentiment data emphasizes the challenging economic environment in the eurozone. This points to ongoing difficulties that may constrain the euro's potential for recovery. There is speculation that the ECB might opt for an interest rate cut earlier than June, which could limit the euro's growth prospects. Scotiabank observes a weakening of the euro around the 1.0850 mark, reinforcing bearish sentiment on short-term charts. A rebound above the 1.0835 resistance level could alleviate pressure on the euro, potentially guiding it towards higher ground around 1.0800. As the month concludes, additional pressure on the dollar is anticipated, confirming the technical nature of the recent dollar weakening rather than a shift in the fundamental trend, according to experts. Despite recent fluctuations, the prevailing trend suggests the dollar's upward trajectory. The dollar's downward trend is expected to be short-lived, considering the outperformance of the US economy and bond yields near three-month highs, which make the greenback appealing. Moreover, the Federal Reserve is not likely to implement interest rate cuts anytime soon, especially given the more accommodative policies pursued by other major central banks globally. Stronger-than-expected data from the US and the cautious stance of Fed officials against premature policy easing contribute to the likelihood of a revision in market expectations, potentially leading to further gains for the dollar following the ongoing consolidation period.

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