Daily Digest: Friday 26th April
USA
US Core PCE data was the centre of market attention through Friday, as the print played into wider inflationary fears. Data showed that core prices on a MoM basis during March rose 0.3%, which despite falling in line with analyst expectations signalled no change from February’s increase. A failure to lower core price inflation remains a key area of contention for an already cautious Fed, with signals of inflation control confidence seeming distant. If inflation remains persistent then the rate cut cycle will likely be delayed into Q4 of 2024 and even Q1 of 2025, introducing a new set of portfolio risks for investors internationally. On a purely theoretical basis, the higher for longer approach negatively impacts US domiciled corporates as the cost of borrowing remains artificially high, meanwhile, the US Dollar will continue to strengthen, as foreign investors exchange their domestic currencies to purchase higher yielding US government debt. Both of these processes have negative implications for US equity pricing.
Theory doesn’t seem to be dictating current market movements, as the three major US indexes closed the session higher. The Nasdaq 100 ($NDX) led gains rising 287.8 points (1.65%) to 17.718.30, followed by the S&P 500 ($SPX) which rose 51.54 points (1.02%) to 5,099.96, and the Dow ($INDU) which rose 153.86 points (0.40%) to 38,239.66.
Following Thursday’s positive earnings call alongside strong forward guidance, shares in Alphabet Inc ($GOOGL), the parent company of Google rose by 10.22% to $171.95. This move pushed the firms total market capitalisation above the $2 trillion level, placing Alphabet within an elite group of four tech stocks (APPL, MSFT, NVDA, GOOGL) to break the market cap milestone. This sentiment reinforces wider bets on both the strength of the US tech sector and the current AI outlook.
Europe
European market performances were stronger through Friday, as the FTSE, STOXX, CAC, and DAX all closed higher. The UK’s benchmark index, the FTSE 100 (FTSE) closed at new record highs, rising 60.97 points (0.75%) higher at 8,129.83. 84 of the index’s constituents closed higher, while only 14 closed down. The FTSE also made new record highs at its intraday peak, just off of the closing price at 8,146.79.
The Pan European STOXX 600 (€SXXP) rose 5.6 points (1.11%) to 507.98, while the French CAC (€FCHI) rose 71.59 points (0.89%) to 8,088.24, and the German DAX (€GDAXI) rose 243.79 points (1.36%) to 18,161.01.
Rest of the World
The headline macro story was the Bank of Japans April monetary policy decision. Rates were held at their current floating range of 0-0.1%, in line with analyst expectations. The decision came alongside Tokyo area CPI data for April, which came in at 1.6%, 0.4 percentage points below the BOJs inflation target and 0.6 percentage points below analyst expectations of 2.2%. The print projects a positive image of slowing inflation across the wider Japanese economy, with Tokyo area data acting as a leading indicator for wider economic trends, underpinning central bank hesitance toward a continuation of the rate hike cycle.
Nikkei 225 (¥N225) performances were stronger through the session, as prices rose 306.28 points (0.81%) to 37,934.76. An area of resistance yesterday between the 37,760 and 37,780 level experienced a role reversal just before the lunch break, acting as a key support as markets moved higher. Japanese Yen depreciations continued, with hopes of rate hikes to strengthen the currency dismissed. As of 16:53 GMT, the currency was trading at 157.495 against the US Dollar, having broken through resistance at the 157 level, trading at new 30-year lows. A form of central intervention across currency market remains expected, though the extent of which remains unknown as the US Dollar continues to strengthen.
The Shanghai Stock Exchange Composite Index (¥SSE) continued to rally, with traders pushing prices 35.73 points (1.17%) higher to 3,088.6357. As noted in yesterday’s RSI reading, moderately bullish momentum was expected into the session, with traders breaking resistance at 3,060 moving the market higher. In the absence of any fundamental market shocks during the weekend, the RSI remains at 59 into Monday, indicating a potential continuation of current market momentum.
The Indian Nifty 50 (₹NSEI) saw an end to it’s winning streak as prices closed 150.4 points (0.67%) down at 22,419.95.
Commodities
WTI crude prices continued to trade within tight ranges on Friday, as prices fell 0.13% to $83.65 per barrel. Despite a breach, the $83.58 technical level acted as a key support for traders, with resistance tested around the intraday highs of $84.40. In terms of longer time frame momentum, the one day charts indicate that the RSI is still 55, indicating moderately bullish sentiment into a new week, though this is below the April peak of 67.5. Geopolitical conflicts remain a key driver of uncertainty across energy markets, the session lacked any major catalysts for movement.
Gold prices closed higher for a consecutive session, rising a further 0.36% to $2,350.90 per ounce. As mentioned yesterday, US inflation data and subsequently the markets rate cut expectations have played out as the main driver behind Gold market momentum this week. The spotlight was held on Friday’s US PCE data print, which was somewhat creatively interpreted by traders, with a convergence between MoM figures and analyst estimates seemingly strengthening deflationary narratives.
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