Ahead of the game: 8 March 2024

This week, US equity markets hit fresh record highs, led by the high-flying tech sector, after Fed Chairman Powell signalled that the Federal Reserve remains on track to cut interest rates this year.

Locally, the ASX2 00 made a fresh record high above 7800, supported by tailwinds from offshore equity markets and a tepid Q4 2023 GDP print, which boosted expectations the RBA will cut rates in the second half of 2024.

• Gold surged 3.71% to a record high of $2164
• In Japan, the Japanese Yen surged to a five-week high as strong wage data brought the Bank of Japan closer to an exit from the Negative Interest Rate Policy
• The US Services PMI eased to 52.6 in February from 53.4
• JOLTS Job Openings fell to 8.86 million in January from 8.889 million in December
• Wall Street's gauge of fear, the Volatility (VIX) index, climbed to 14.43 from 13.12
• In the US, Fed Chair Powell noted that while rate cuts aren’t imminent, he expects the Fed to cut rates this year
• The ECB kept rates steady, slightly lowering its inflation and growth forecasts
• In China, the National People’s Congress aims for economic growth of "around five percent" for 2024, unchanged from 2023
• In Australia, GDP grew by 0.2% in the December quarter, reaching an annual rate of 1.5%
• Crude oil prices fell to $79.26, down 0.90%, after the IEA remarked on the well-supplied oil market.

• AU:NAB Business Confidence (Tuesday, 12 March at 11:30am AEST)
• NZ:Business NZ PMI (Friday, 15 March at 11:30am AEST)

• CH: New Yuan Loans (Tuesday, 12 March )
• CH: House price index (Friday, 15 March at 12:30pm AEST)

• US: CPI (Tuesday, 12 March at 11:30pm AEST)
• US: PPI and Retail Sales (Thursday, 14 March at 11:30am AEST)
• US: Industrial Production (Saturday, 16 March at 12:15am AEST)
• US: Michigan Consumer Sentiment (Saturday, 16 March at 1:00am AEST)

• UK: Unemployment Rate (Tuesday, 12 March at 6:00pm AEST)
• UK: GDP (Wednesday, 13 March at 6:00pm AEST)

• AU

NAB Business Confidence

Date: Tuesday, 12 March at 11.30am AEDT

The NAB Business Confidence index increased to 1 in January following a 7-point rebound in December. Still, Business confidence remains weak compared to historical levels, as cost pressures across the economy and slowing growth, weigh on sentiment.

Business Confidence is expected to rise in the coming months as the focus shifts towards RBA rate cuts during the second half of 2024, and inflationary cost pressures continue to ease.

NAB Business Confidence chart

• EU

UK gross domestic product

Date: Wednesday, 13 March 2024 6pm AEDT

The UK economy has contracted by 0.3% in 4Q 2023, putting the country officially in a recession (first time since Covid-19 in 2020) after contracting by 0.1% in 3Q 2023. Ahead, markets will be watching for any signs of improvement from the upcoming monthly GDP read, although the series of economic data thus far still suggest weak growth conditions in place, and any recovery may still be meagre.

Further contraction in growth may raise bets that the Bank of England (BoE) may shift to a faster pace of interest rate cuts this year. Thus far, interest rate futures reflect that broad consensus are priced for the central bank to cut interest rate in August this year, with overall two 25 basis point (bp) cuts through 2024.

• US

CPI

Date: Tuesday, 12 March at 11.30pm AEDT

In January, headline inflation in the US rose by 0.3% MoM, allowing the annual rate of headline inflation to ease to 3.1% YoY from 3.4% prior, although higher than market forecasts of 2.9% YoY. Core CPI rose by 0.4% MoM, as the annual core rate of inflation held steady at 3.9%, a rate that was also higher than market forecasts of 3.7%.

After an initial shock, markets chose to look through the hotter January inflation data based on the view the rise was driven by one-time new year price increases in the services sector (including medical, financial services, car insurance, and daycare) and an outsized rise in shelter costs.

Traders will examine this month’s CPI data closely to ensure that there are no repeats of those one-off price rises. If the number is hotter than expected, markets will unlikely be so forgiving. The expectation is for headline CPI to rise in February by 0.4% MoM, which would see the annual rate remain stable at 3.1%. Core CPI is expected to rise by 0.3% MoM which would see the annual rate cool to 3.7%.

US core inflation rate chart

US University of Michigan (UoM) consumer sentiment (preliminary)

Date: Saturday, 16 March 2024 1am AEDT

The US consumer sentiment index has been on a recovery trend over the past two years, coming in at 76.9 in February this year which marked a stark improvement since its 2022 all-time low of 50. Further improvement in the consumer sentiment index may aid to validate current soft-landing hopes, given that past historical recessions in the US tend to be accompanied with a sharp weakening in consumer sentiments and it clearly does not seem to be the case with current trend.

Ahead, expectations are for the preliminary reading for March to come in at 77.0, a slight uptick from the previous 76.9. Improving consumer sentiments may potentially provide some support to spending and hence, economic resilience.

US UoM consumer sentiment index