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Bitcoin hit a record. Gold rose on safe haven demand walking into the Federal Reserve (Fed) Chair Jerome Powell’s testimony before the Congress. Powell is expected to ask policymakers for patience before cutting interest rates. Even though higher yields – that would result from a hawkish shift in Fed expectations – are not favourable for the valuation of gold, the size and the amplitude of a potential market selloff could help investors look past the higher opportunity cost of holding the non-interest-bearing gold and push the price of an ounce further up.

US major indices were down yesterday, as Apple got hit by additional unpleasant news that its iPhone sales in China fell 24% over the first six weeks of the year. The stock fell and closed below a key technical level: the major 38.2% retracement on the bullish trend forming since the beginning of 2023. Technically, the stock has now stepped into the medium-term bearish consolidation zone.

Elsewhere, the Bank of Canada (BoC) is expected to keep its policy rate steady today and the UK Chancellor of the Exchequer will reveal the budget. He is expected to aim for tax cuts to please British voters, but he has a limited margin and some tax cuts could lead to inflationary pressures prompting the Bank of England (BoE) to maintain a tighter monetary policy for an extended period, which may further burden mortgage payers. Hunt should find a fine balance. If you think you can do better than him, please try:

The UK Budget Game: https://www.bloomberg.com/features/2024-uk-budget-game/

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China wants to grow 5% this year, create around 12 mio jobs in the urban area and print a 3% inflation. Targets are ambitious – especially the inflation target - given that the base effect will not play in favour of growth this year and deflation is not an easy battle to win. Caixin PMI printed an unexpected slowdown in the expansion of Chinese services in February, while Tesla tumbled 7% yesterday after announcing that its shipments from the Shanghai mega factory slumped to the lowest levels in a year due to a dull activity during the Lunar Year Holiday and renewed price competition in the EV market.

While Tesla was sliding a big 7%, Nvidia was busy traveling through uncharted territories. The company added another 3.50% yesterday and stole the title of the world’s ‘3rd biggest company’ from the Saudi Aramco. Apple fell free yesterday after the EU imposed a $2 billion penalty on accusations that Apple's platform unfairly marginalized competitors in the music-streaming industry, including Spotify. The S&P500 timidly advanced to a fresh record but closed the session slightly down; investors didn’t necessarily wanted to take a clear direction before Federal Reserve (Fed) Chair Jerome Powell’s semiannual testimony before the Congress on Wednesday and Thursday.

The US dollar index is stuck between its 100 and 200-DMA before Powell’s speech and a series of jobs data from the US this week. The EURUSD sees resistance into its 50-DMA, the USDJPY consolidates above 150, gold is on an impressive rally since last Friday on rising safe haven demand before Powell’s speech and US crude failed to extend gains above $80pb even after the Chinese stimulus bets.

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You wouldn’t know, by looking at the S&P500’s performance on Friday, that a US regional bank was having a rough time. Almost a year into last year’s regional bank crisis and about a month after a first post-earnings free-fall, the New York Community Bancorp – a commercial real estate lender in New York - fell more than 25% on Friday after saying that it discovered ‘material weaknesses’ in the way it tracks loan risks. But the KBW’s bank ETF closed the session near flat, the S&P500 rose to a fresh record, its 15th fresh record since the year began, Nasdaq 100 advanced to a fresh record as well, even the small cap index closed the week at an almost 2-year high. Stocks in Europe also closed the week on a high note, while the Japanese Nikkei hit a fresh record before giving back advance early Monday.

This week, investors will focus on the Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before the Congress, the US jobs data, the European Central Bank (ECB) decision and China’s National Congress.

US crude made an attempt above the $80pb mark on Friday, on rumours that OPEC+ would extend its production cuts to the 2nd quarter. The weekend news confirmed the rumours. The barrel of American crude saw a limited enthusiasm however above the $80pb after the announcement – a sign that OPEC cuts alone won’t keep the price of crude above the $80pb level.

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Thank God! Yesterday’s inflation report from the US wasn’t worse than expected. A soft jobless claims figure also helped cooling the hawkish Federal Reserve (Fed) worries. The S&P500, Nasdaq and Russell 2000 rebounded yesterday. But the US dollar rebounded, as well, following the PCE print.

In Europe, the inflation heatmap was mixed. The EURUSD slipped below the 100 and 200-DMA, fundamentals back a further depreciation of the euro against the greenback provided the diverging strength of the underlying economies. The USDJPY is back above the 150, but can probably not go further up because traders fear a direct FX intervention from the Japanese authorities to prevent the yen from losing too much value. Nikkei 225 hit a fresh record.

Elsewhere, the Chinese PMI figures came in slightly better than expected in February but the manufacturing activity shrank for the 5th straight month and home sales slumped faster despite stimulus measures.

While China is struggling with a worsening property crisis, aging population and deflation, India posted a 8.4% growth in Q4!

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Economic data from the US kept investors in a cautious mode yesterday as the latest wave of data showed that the US economic growth was slower than expected and price indicators were higher than expected in Q4. That’s exactly the opposite of what the bulls wanted to see. The S&P500, Nasdaq and Russell 2000 fell and the US dollar index failed to extend gains above the 100-DMA.

All eyes are on the PCE prints today. The Federal Reserve’s (Fed) favourite gauge of inflation, the core PCE, is expected to print the biggest jump in a year, both 3 and 6-year figures are expected to rise back above 2% after having eased below this level by the end of last year. A figure in line or ideally softer than expected should keep the Federal Reserve (Fed) doves betting for the first rate cut to happen in June, whereas a stronger-than-expected figure could strengthen the hawks’ hand and push the expectation of the first cut to… July.

Elsewhere, the Bank of Japan’s (BoJ) core PCE index came in stronger-than-expected. The USJDPY fell below the 150 psychological mark. Euro-area countries will also release their inflation numbers.

The EURUSD bears are waiting in ambush to send the pair below the 100 and 200-DMA.

Elsewhere, Bitcoin rally gains momentum and US crude tests the $80pb to the upside on news that OPEC+ are planning to extend production cuts to the second quarter.

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Apple abandoned its ambition to build an electric car to concentrate on AI.

The S&P500 had a slow session yesterday, as the US yields were little changed on the back of mixed economic data, the rising suspense regarding whether the US will default on March 1 and a 7-year US government bond auction that settled above 4.30%. The durable goods orders tanked more than 6% in January, the most in nearly 4 years. Richmond manufacturing index came in better-than-expected, except for shipments, while Atlanta Fed’s GDPNow index was revised up to 3.2% for this quarter from 2.9% printed earlier.

Today, the US will reveal its latest GDP numbers. The US economy is expected to have grown 3.3% in Q4. That’s lower than the 5% printed in the Q3, but it’s still a very strong growth for an economy that underwent the most aggressive tightening cycle of its modern history. And if Atlanta’s GDP prediction is an indication, the slowdown will slow in the first quarter of this year.

The US dollar index lacks direction before tomorrow’s inflation print. US crude continues to test the $79pb offers to the upside. Inflation in Australia came in lower than expected, keeping the Reserve Bank of Australia (RBA) hawks away from the marketplace, and the Reserve Bank of New Zealand (RBNZ) kept its rate unchanged for the 5th straight meeting and said that risks to inflation became more balanced.

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European and American stocks kicked off the week with a pause; the Stoxx 600, the S&P500 and Nasdaq 100 all retreated from an ATH level on Monday. MAMAA stocks were down around 1%, Amazon – which had it first day at Dow Jones Industrial index fell 0.15% whereas Nvidia managed to eke out a small gain.

It feels like there is a moment of calm and silence in the aftermath of major tech earnings, investors will decide whether this rally deserves to continue higher straight away. The week brings some important economic data on the table. US GDP data is due Wednesday, inflation on Thursday. And before that, today, we will have an insight on the durable goods orders, house prices and the Richmond Fed manufacturing index. Strong growth, combined to soft inflation should fuel the goldilocks trade, but there are concerns regarding an uptick in inflation.

And speaking of inflation, inflation in Japan fell to a 22-month low. The Bank of Japan (BoJ) is in no rush to hike the rates this April. The USDJPY is getting comfortably near the 150 level, as the Nikkei 225 consolidates near ATH levels.

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Even though we saw some consolidation on Friday following a significant rally during the week, last week ended on a great note for the major US, European and Japanese stocks. Chinese and British stocks are left behind the global rally.

It’s important to keep in mind that while everybody was watching Nvidia with their stomachs in their mouth - and the broad-based stock rally that followed its earnings, the US yields were gently drifting higher. This week, investors’ attention will gently shift from earnings to economic data. The latest US GDP update – due Wednesday - is expected to confirm a 3.3% growth in Q4, with significantly lower price index. And on Thursday, the PCE data are expected to confirm relatively soft figures – softer than the CPI, most probably thanks to the different weights that the index attributes to different categories of goods and services. In all cases, a strong growth could revive the goldilocks optimism if inflation numbers continue to trend lower. For the market rally to continue, we just need strong growth and soft inflation data from the US. Easy, no?

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We knew that yesterday was going to be a good day – at least for the stock markets, as enthusiasm around Nvidia spilled over global equity markets, with US, European and Japanese stocks hitting ATH.

The cheery mood in the global stock markets was completely decoupled with the gloomy mood in the sovereign space. The US 2 and 10-year yields rose yesterday because some more Federal Reserve (Fed) members warned about cutting the US rates too early and too much. Yesterday’s stronger-than-expected manufacturing and housing data came as further evidence that the US economy doesn’t necessarily need rate cuts in a rush. But the US dollar appetite was nowhere to be found, the dollar index remains offered into the 100-DMA and the EURUSD shortly tested its 50-DMA – near 1.0883 – to the upside yesterday and is trying to clear its 200-DMA sustainably.

In energy, US crude advanced to $79 per barrel yesterday after a lower-than-expected jump in US oil inventories last week, while nat gas futures are having a hard time rebounding after a dip to 1.55.

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