By Vivek Kumar
Moving Markets Today: Asia Tracks Wall Street’s Dip, Oil Prices Stable; UK Retail Sales Slow, RBA Maintains 4.35% Interest Rate, Eyes on UK Construction PMI
The main indexes on Wall Street closed lower as Federal Reserve Chair Jerome Powell dismissed speculations of imminent rate cuts. In Asia, shares fell as hopes for a quick pivot by the U.S. Federal Reserve were dampened by data. Oil prices remained stable amid assessments of Blinken’s visit to the Middle East. UK retail spending growth slowed down in January. The Reserve Bank of Australia (RBA) opted to keep the 4.35% interest rate unchanged and revised down inflation and growth forecasts. According to a survey by JPMorgan traders, inflation and the U.S. election are expected to drive market trends in 2024. Here are five key takeaways for your day.
UK Retail Sales Growth Slows in January
UK retail spending growth slowed in January, reflecting ongoing financial strains on households due to the cost-of-living crisis. The British Retail Consortium reported a 1.2% annual increase in retail sales, down from December’s 1.7% and the three-month average of 1.9%. This growth also lagged behind December’s 4% consumer price inflation, indicating a decrease in actual sales volume, a trend observed over the past three years.
BOE’s Pill Suggests Possible Rate Cut in 2024 as a ‘Reward’ for Inflation Decline
Huw Pill, the Bank of England‘s Chief Economist, hinted at the possibility of lowering interest rates this year as a form of acknowledgment for the economy’s success in reducing inflation. Pill suggested that if inflation continues to decline as anticipated, borrowing costs could follow suit without necessarily waiting for the Consumer Prices Index to reach the 2% target. He noted a shift in monetary policy compared to the previous year, indicating that most policymakers are now debating when to initiate interest rate cuts rather than whether to do so. Speaking at an online forum organized by the BoE, Pill highlighted the need for further signs of weakening underlying factors of inflation, such as wages and service prices, before they opt for rate reductions.
RBA Keeps Interest Rate at 4.35%, Cuts Inflation and Growth Forecasts
The Reserve Bank of Australia (RBA) decided to keep the Official Cash Rate (OCR) at 4.35%, meeting market expectations. This marks the second consecutive meeting with unchanged rates following a 25 basis points increase in November. The RBA’s quarterly Statement on Monetary Policy forecasts inflation to return to the target range of 2-3% by late 2025, reaching a midpoint of 2.5% by 2026. However, economic growth forecasts have been revised downwards, with an expected annual expansion of 1.3% in the June quarter of this year, down from the previous estimate of 1.8%. Projections for the end of 2024 have also been adjusted to 1.8%, while estimates for late 2025 and June 2026 remain steady at 2.4%.
What’s Coming Up
This week, the economic agenda is packed with significant updates across various regions. In Europe, attention is on the EU’s December retail sales data, Germany’s January factory orders, the UK’s BRC-KPMG retail sales monitor findings, and S&P Global’s construction PMI data. Additionally, the UK will release its Halifax house price index for February. Over in the United States, focus remains on trade figures and the annual review of the Consumer Price Index (CPI) inflation rate. China will be keeping a close watch on its CPI, Producer Price Index (PPI) inflation, and credit aggregates.
On the corporate front, all eyes are on earnings reports, particularly in the U.S., where media giants and tech companies including Fox, News Corp, Disney, Thomson Reuters, The New York Times Company, Alibaba, Arm, Spotify, and Uber are set to announce their financial results. Meanwhile, globally, attention is also drawn to the next round of US presidential primary contests in Nevada scheduled for Tuesday, as well as Finland’s presidential run-off election on Sunday.
Asia Equities Slide; Dollar Strengthens Toward 3-Month High
Stock markets experienced a mixed day, with the Dow Jones Industrial Average falling by 0.71% to 38,380.12, the S&P 500 dropping 0.32% to 4,942.81, and the Nasdaq Composite slipping 0.20% to 15,597.68. The FTSE 100 closed flat after trimming gains, while the FTSE 250 fell 0.8%. Boeing faced a setback, seeing a 1.3% decline due to quality issues in some 737 MAX planes causing delivery delays. Meanwhile, Tesla shares closed 3.7% lower following a price target reduction by Piper Sandler. On the upside, Nvidia achieved a new record high, increasing by 4.8% after Goldman Sachs raised its price target. Asian markets mirrored the dip on Wall Street, with Japan’s Topix and South Korea’s Kospi both down by 0.8% and 0.6%, respectively. Conversely, Hong Kong’s Hang Seng index rose by 1%, and China’s CSI 300 added 0.6%. In commodities, U.S. crude oil slightly decreased to $72.74 a barrel, while Brent futures dropped to $77.96. Gold prices saw a modest increase to $2,027.80 an ounce, and Bitcoin traded higher at 42,905.10, up by 1.34%.
The biggest drivers of global markets this year, according to traders surveyed by JPMorgan, will be inflation and the U.S. presidential election. The survey published on Tuesday showed that 27% of traders see inflation as having the biggest impact, followed by 20% for the November election, Reuters reported.
