Big Week Ahead!

Thoughts of the Day

This week features three major central bank policy meetings. The Bank of Japan is expected to end its negative interest rates policy. The US FED will release its quarterly economic projections, including projections of the path of policy interest rates. The Bank of England is expected to maintain unchanged interest rates, likely resulting in minimal market impact. With significant event risk this week, appropriate position sizing for your trades is important!

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Week Ahead

Monday: Eurozone Consumer Price Index will be released with the annual rate expected to edge lower to +2.6% from +2.8% and the core annual rate to fall to +3.1% from +3.3%.

Nvidia will be hosting its 2024 GTC (GPU Technology Conference) AI conference. More details about the B100 Blackwell AI chip, the next most capable Nvidia AI GPU, are expected to be announced.

Tuesday: The Bank of Japan is expected to end its negative interest rates policy by hiking the policy rate from -0.1% to 0%.

The Reserve Bank of Australia is expected to keep interest rates at 4.35%.

The Canadian Consumer Price Index is expected to show that prices rose +3.1% Year-on-Year, up from +2.9% in Jan. 

Wednesday: The UK Consumer Price Index is expected to show that prices rose +3.6% Year-on-Year, down from +4.0% in Jan. 

The Federal Reserve is expected to keep interest rates unchanged at 5.5%.It’s quarterly economic projections (dots plot) and Fed Chair Powell’s press conference will provide clues on the timeline of possible interest rate cuts in the months ahead.

Thursday: The Bank of England is expected to keep interest rates unchanged at 5.25%.

Friday: Fed Chair Powell is due to deliver opening remarks at a Fed Listens event, in Washington DC.

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What Happened Yesterday

Market Movements as of New York Close 15 Mar 24 (17 Mar for Crypto)

The University of Michigan’s consumer sentiment in the US declined slightly to 76.5 (expected 76.9) in March from February’s 76.9, marking the lowest point in three months. Inflation expectations remained stable, with the outlook for the coming year holding at 3% as it did in February and the five-year projection consistent at 2.9% as it was over the past 3 months.

The US Treasury Yield curve inversion widened to 0.41% as the US 2-year bond yield rose +0.04% to 4.72% while the 10-year yield edged +0.02% higher to 4.31%. 

The US stock futures moved sideways through the Asian trading hours. It then started to gain some upside momentum in the early London hours, allowing the S&P 500 futures to reach a peak of 5230 (+0.28%). However, risk sentiment soon eroded after, with the S&P 500 futures falling -0.88% from the highs to hit 5184 when the New York session began.

The US stock market opened much lower from Thursday. It then attempted to recover from the lows during the New York session but attempts were futile. As a result, the S&P 500 fell -0.65% (high: +0.06%, low: -0.74%), the Dow Jones slid -0.49% (high: +0.06%, low: -0.74%) while the Nasdaq plunged -1.15% (high: -0.47%, low: -1.39%).

The crypto market continues to see heavy selloffs as leveraged positions get washed out. Bitcoin fell below 65,000 on Sunday while Ether fell below 3,500. However, both of them eventually closed higher near the 69,000 and 3,700 levels respectively.
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Headlines & Market Impact

Laid-off techies face ‘sense of impending doom’ with job cuts at highest since dot-com crash

Notable Snippet: Since the start of the year, more than 50,000 workers have been laid off from over 200 tech companies, according to tracking website Layoffs.fyi. It’s a continuation of the predominant theme of 2023, when more than 260,000 workers across nearly 1,200 tech companies lost their jobs.

Alphabet, Amazon, Meta and Microsoft have all taken part in the downsizing this year, along with eBay, Unity Software, SAP and Cisco. Wall Street has largely cheered on the cost-cutting, sending many tech stocks to record highs on optimism that spending discipline coupled with efficiency gains from artificial intelligence will lead to rising profits. PayPal announced in January that it was eliminating 9% of its workforce, or about 2,500 jobs.

All told, 2023 was the second-biggest year of cuts on record in the technology sector, behind only the dot-com crash in 2001, according to outplacement firm Challenger, Gray & Christmas. Not since the spectacular flameouts of Pets.com, eToys and Webvan have so many tech workers lost their jobs in such a short period of time.

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BOJ to end negative rate policy next week, says Nikkei

Notable Snippet: The Bank of Japan is expected to end its negative interest rate policy on Tuesday on substantial wage hikes by big firms in this year’s wage negotiations, the Nikkei newspaper reported on Saturday.

The BOJ began coordinating both within and outside the bank Friday on ending its negative interest rate policy, the economic daily said.

Japan’s biggest companies agreed to raise wages by 5.28% for 2024, the heftiest pay hikes in 33 years, the country’s largest union group said on Friday.

This year’s wage hikes “are of a level that even reflationists who are cautious about modifying monetary policy would accept a change in policy,” the Nikkei cited one BOJ source as saying.

BOJ officials, including Governor Kazuo Ueda, have recently stressed the timing of a shift away from negative rates would depend on the outcome of this year’s annual wage negotiations between workers and employers.

Sources have told Reuters the BOJ will debate ending its negative rates next week if Friday’s preliminary survey on big firms’ wage talks outcome yields strong results.

Friday’s bigger-than-expected pay hikes have significantly heightened the chance the BOJ will end eight years of negative interest rate policy next week, marking a landmark shift away from its huge stimulus programme.

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Putin warns the West a Russia-NATO conflict is just one step from World War Three

Notable Snippet: Russian President Vladimir Putin warned the West on Monday that a direct conflict between Russia and the U.S.-led NATO military alliance would mean the planet was one step away from World War Three but said hardly anyone wanted such a scenario.

The Ukraine war has triggered the deepest crisis in Moscow’s relations with the West since the 1962 Cuban Missile Crisis. Putin has often warned of the risks of nuclear war but says he has never felt the need to use nuclear weapons in Ukraine.

French President Emmanuel Macron last month said he could not rule out the deployment of ground troops in Ukraine in the future, with many Western countries distancing themselves from that while others, especially in eastern Europe, expressed support.

Asked by Reuters about the Macron remarks and the risks and possibility of a conflict between Russia and NATO, Putin quipped: “everything is possible in the modern world.”

“It is clear to everyone that this will be one step away from a full-scale World War Three. I think hardly anyone is interested in this,” Putin told reporters after winning the biggest ever landslide in post-Soviet Russian history.

Putin added, though, that NATO military personnel were present already in Ukraine, saying that Russia had picked up both English and French being spoken on the battlefield.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord