Wealth Wednesday
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Market Data
Local
Global
*Data as of 4pm WAT
Market News
Local
Global
Market Commentary:
Currencies/Macro:
The US dollar experienced minimal net changes overall, with a slight retraction following the release of ISM services data. However, the Japanese yen stood out as the day's strong performer. The EUR/USD climbed from 1.0845 to 1.0876 after the ISM data was published but then fell back to 1.0855. The GBP/USD gained approximately 35 pips, reaching 1.2735 following the data release, but later settled with a modest 0.1% increase at 1.2705. The USD/JPY showed a notable decline, dropping by 0.4% to end at 149.90, independent of the US data release timing.
The US Institute for Supply Management's services PMI for February dropped to 52.6, slightly below the expected 53.0 and the previous 53.4, with increases observed in activity and new orders but decreases in employment and prices paid. Additionally, January's factory orders excluding transport were weaker than anticipated, showing a 0.8% month-on-month decrease compared to an expected 0.1% drop.
In the Eurozone, the Producer Price Index (PPI) for February was more disappointing than expected at -0.9% month-on-month, largely attributed to declining energy costs, though the index excluding energy and construction saw a 0.2% increase. The Eurozone services PMI for February was adjusted slightly upwards to 50.2 from an initial estimate of 50.0.
In the UK, the final February services PMI was revised downward to 53.8 from the preliminary 54.3, indicating a slight contraction in service sector growth compared to initial estimates.
Interest Rates:
The yield on the US 2-year Treasury note decreased from 4.60% to 4.55%, and the yield on the 10-year Treasury note dropped from 4.21% to 4.14%. Market expectations for the Federal Reserve's funds rate, set at 5.375%, are projected to remain the same at the upcoming 20 March meeting, with an 80% probability of an interest rate cut by June.
In response to a risk-off sentiment, credit spreads widened, with both the Main and CDX indices increasing by one basis point to 55 and 52, respectively. U.S. investment-grade (IG) cash spreads also widened by 1-2 basis points. Despite the cautious market mood, primary market activity remained robust as issuers aimed to capitalize on market conditions before upcoming data releases. In Europe, a notable 19 non-sovereign, supranational, and agency (ex-SSA) issuers accessed the market, raising approximately EUR 12.85 billion. The U.S. market also experienced vigorous activity, with 10 issuers raising USD 20.4 billion, indicating continued strong demand and issuer confidence in capital market conditions.
Commodities:
Crude oil prices declined amid a broader risk-off sentiment in the markets, with the April West Texas Intermediate (WTI) contract decreasing by 0.66% to $78.22 and the May Brent contract dropping by 0.88% to $82.07. Market disappointment due to the absence of new policy measures from China's National People's Congress (NPC) contributed to the negative market mood. Rystad Energy raised its Brent oil price forecast for 2024 by $5 to $85 following OPEC's decision to extend production cuts. Additionally, RBC observed greater unity within OPEC+, noting the UAE's decreased likelihood of seeking a quota review and no apparent rift with Russia. In the gas sector, Ukraine's energy minister confirmed the country would not agree to let Russian gas transit to Europe continue through Ukraine after the current deal ends this year.
In the metals market, prices fell, with copper decreasing by 0.63% to $8,489 and nickel declining by 1.67% to $17,645, reflecting lukewarm reactions to policy announcements from China. There were no significant new developments, although First Quadrant mentioned plans to obtain authorization to sell over 120,000 tonnes of copper concentrate stored near a Panamanian port in the upcoming weeks. Fitch downgraded Alcoa Corp's primary borrowing subsidiary, Alco Nederland Holding BV, to junk status, citing lower metal prices and increasing costs. The London Metal Exchange (LME) resisted implementing a green nickel future, arguing that the market size does not justify such a product.
Iron ore markets also weakened following the NPC, with disappointment over China's deficit target and the absence of bold measures to stimulate consumption or address the real estate sector's issues. The April Singapore Exchange (SGX) iron ore contract fell by $2.55 to $114.05, while the 62% Mysteel index dropped by 90 cents to $116.95.
Investment Tip of The Day
Regularly assess your risk tolerance and investment horizon, and ensure your portfolio aligns with these parameters. This alignment is crucial for maintaining an investment strategy that you are comfortable with and that meets your long-term financial objectives. Adapting your portfolio to your risk tolerance helps in managing stress and ensuring disciplined investing.