General Market Analysis 12/02/2024

Tech Stocks Drive Higher Again – Nasdaq up 1.25%

US tech stocks maintained their stellar bull run on Friday with the S&P recording its first close above 5,000 and the Nasdaq briefly trading above 16,000 as investors continued to bet on AI technology. The Nasdaq led the way, closing up 1.25% on the day, followed by the S&P which added 0.57%, the Dow did however buck the trend, closing down 0.14%. US treasury yields also continued to gain back lost ground ahead of crucial inflation data this week, the 2-year moving up to 4.499% and the benchmark 10-year closing at 4.195%. The dollar was relatively flat on the day although traders noted that the Jpy remained weak across the board as rate hike expectations in Japan were pared back further. Oil prices climbed again, Brent adding 0.7%, up to $82.19/b and WTI gaining 0.8% to $76.84/b and Gold drifted lower to trade just above the $2,020 level by the close.

US Inflation Data is Crucial for Markets this Week.

The key US CPI data on Tuesday is setting up to be another crucial piece in the Fed puzzle for investors and for those hoping for a rate cut in the next few months it is looking imperative that it continues to show slowing inflation. Other recent data prints – in fact the majority of them – out of the US have indicated a strong and resilient economy which would not normally necessitate monetary easing, especially recent jobs numbers. Bets are now down to 18% for a cut in March with May looking favourite for the Fed to start easing with odds currently sitting around 70%. However, if the inflation data starts to blip up again, as some expect in such a resilient economy, then these chances could blow out quickly and markets would have to react accordingly.

Holidays and Thin Data Day to Kick off the Trading Week

The trading week is set to start of with a whimper rather than a bang today as traders in Asian centres face reduced liquidity due to Lunar New Year celebrations (and the Super Bowl) which have closed markets across the region. There is very little in the way of data releases today, but we do have some key central bankers speaking. In the Asian session we hear from the RBNZ’s Adrian Orr who is delivering his Financial Stability Report in Wellington. Later in the day there are separate speeches from the FOMC’s Barking and Bowman before we round out the session hearing the Bank of England’s Governor Andrew Bailey when he speaks at the UK’s prestigious Loughborough University.