Daily Digest: Wednesday 28th February
USA
The headline economic releases for Wednesday were the Q4 prelim GDP figures & GDP deflator, setting the scene for tomorrow’s January PCE (Personal Consumption Expenditure) release. The Q4 GDP prelims came in at 3.2%, 0.1 percentage point lower than analyst expectations, signalling a slight slowdown in economic growth through the fourth quarter of 2023. Despite falling short of expectations the impact of the preliminary figures on markets should be somewhat limited. Meanwhile, the GDP deflator, a measure of price increases, was recorded at 1.6%, 0.1 percentage points higher than the 1.5% expectations. This suggests that despite a marginal slowdown in economic growth, inflationary pressures remain present.
Momentum weakened across US markets, with the S&P 500, Nasdaq 100, and Dow all closing down, following the Q4 Prelim GDP and GDP deflator announcements. As noted above, the real focus for investors this week is tomorrow’s PCE release. As one of the FEDs metrics of choice, data should provide some insight into the direction of monetary policy adjustments.
Apple ($APPL) shares struggled through the session, as prices fell -0.66% following the cancellation of the ‘Apple Car’ EV program, a decade long project thought to have cost Apple billions of dollars. Despite applying some downward pressure to price in the near term, I can’t see the announcement affecting investor sentiment in the longer term, with shares still trading at $181. Additionally, Apple announced a pivot in focus, to their generative AI projects, boosting R&D, and resource allocation in the area. Such a pivot if executed successfully, should allow the firm to maintain a competitive edge, as the market demands new and innovative AI led products. Furthermore the move should garner the attention of new investors across both the AI and tech space.
Europe
The FTSE 100 closed -0.76% down, falling to 7,624.98, marking its largest single session decrease this week.
UK property sector woes continued through Wednesday, as Taylor Wimpey (£TW) reported their FY23 earnings. Data showed that revenues had fallen some 20.5% to £3.5bn. As noted by senior executives, the current environment for construction and development is far from ideal. Interest rates have remained relatively high, forcing the cost of borrowing for both developers and home buyers higher, while demand pressures and supply shortages have pushed average house pricing up.
Following earnings, Taylor Wimpey shares fell 4.77%, with selling pressures affecting five of the publicly listed property firms identified in Monday’s CMA housebuilding report. Among them, Persimmon (£PSN) led declines at 2.85%, followed by Redrow (£RDW) at 2.21%, Bellway (£BWY) at 2.07%, Berkeley Group (£BKG) at 2.04%, and Vistry (£VTY) at 1.28%.
The decline in share prices across the sector could become a nice setup to monitor over the coming months, with homebuilding and development firms poised to exploit both a decline in rates, and stronger economic growth figures. During January, speculators priced in the possibility of the BOE commencing the rate-cutting cycle in May. This scenario, theoretically speaking, could lead to improved borrowing conditions, including more favourable mortgage terms and cheaper investment financing, provided inflation is held at bay.
The STOXX 600 (€STOXX) fell during the European session, closing down 0.35% at €494.59, just €2.66 off last week’s all-time highs. This cooling off was somewhat expected as investors factor in new, higher valuations. At this time a marginal decrease in price is relatively insignificant, with the French CAC (€FCHI) and German DAX (€GDAXI) both finishing up 0.075% and 0.25% respectively, indicating investor confidence across Europe remains positive.
Rest of the World
The Nikkei 225 closed Wednesday’s session down 0.08%, marking a slowdown in buying pressure following last week’s all time highs. Similarly to the STOXX, some consolidation should be expected, as investors begin to re-evaluate and alter positions incorporating new higher valuations.
Chinese benchmark, the Shanghai Composite Index also closed the session down, falling 1.91%. Signalling that Chinese markets are by no means out of the proverbial woods, in terms of both economic and market strain. Investors have maintained a position of caution toward slowing growth and adverse market activity, experienced across the nation.
Cryptocurrencies
Bitcoin managed to break $60,000 for the first time since 2021 on Wednesday afternoon, demand has remained strong as the ‘Bitcoin Halving’ looms ever closer. The ‘halving’ refers to the process in which the reward for ‘mining’ a cryptocurrency is reduced, slowing the release of new supply, as the percentage of circulating Bitcoin edges toward 94% of maximum supply. Begging the question, will Bitcoin break new all time highs within the next week?
As of 9pm (GMT) Bitcoin was trading up 6.04% at $60,393. Prices had managed to push through $62,000 during the afternoon, but were met with some resistance forcing prices back down from their 52-week highs. Despite falling off the session highs, investor sentiment remains widely unchanged. Ethereum also put in a strong session rising a respectable 1.43% to $3,300.
US crypto exchange Coinbase ($COIN) experienced service outages throughout Wednesday evening GMT, with the firm struggling to accommodate increased service demand as it reopened. Coinbase shares fell into the close, and continued their declines after the bell, falling by a further 1.64% at the time of writing. Despite causing a short period of user panic, it is too early to comment on the cause of issues, and the risk of reoccurrence. If the issues are contained to the short term, investor sentiment should remain virtually unchanged. However, trading activity will likely be driven by Coinbase’s handling of service issues, including the identification of the problem, the implementation of a fix, alongside deployment of preventative measures ensuring future disruption is minimised.
Commodities
Crude took a 0.62% decrease in price on Wednesday, trading at $78.38 per barrel, this move shaved off almost half of Tuesday’s gains.
For the second session running Gold failed to find any real footing, moving marginally down 0.0587%.
What to watch
US Jobless (unemployment) Claims
US PCE (Personal Consumption Expenditures)
Canadian M/M GDP
US Earnings:
Anheuser-Busch Earnings ($BUD)
Dell ($DELL)
Hewlett-Packard ($HPE)
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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