Calm Holiday Markets Ahead of Big Trading Week
With US markets closed for Good Friday observance the only lead in we can take is from Japan’s Nikkei which on Friday ended up +0.5% to 40369. Nikkei 225 futures settled at 40,360 yen on the Chicago Mercantile Exchange. The dollar index edged slightly lower after three days of gains. Dollar-yen was little changed in early Sydney trading (along with other major currency pairs) for a third day at 151.35 with traders still eying off the 152.00 level and possible price action above which may trigger intervention from Japanese authorities. Despite markets being closed, there was some key inflation data and commentary from Federal Reserve chair, Jay Powell.
Inflation Data Still Cooling in the US
The Federal Reserve’s preferred gauge of underlying inflation cooled last month while household spending rebounded. The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 0.3% from the prior month (estimate +0.4%), data out Friday showed. That followed a 0.5% reading in January.
While the downside miss was partially offset by upward revisions to the January data, core inflation still cooled as Powell said he expected in remarks on Friday. This keeps a June cut very much alive and speaks to the narrative of keeping stocks in favour by fund managers. Although the Fed chief said that the US central bank isn’t in any rush to cut interest rates as policymakers await more evidence that inflation is contained, markets are still seeing chance of a 25 basis point cut in June, the first of three and again, good for stocks.
Also good for global sentiment was data released Sunday that showed China’s manufacturing activity expanded in March for the first time since September, a sign that the world’s second-largest economy is stabilizing. The official manufacturing purchasing managers index rose to 50.8 from 49.1 in February. This should also help growth currencies like Aussie and kiwi which are just above 0.6500 and just below 0.6000 respectively. On the sobering side a separate data print showed that China’s home sales slump dragged on in March, signalling a much-hoped turnaround for the sector isn’t on the horizon.
Gold Still in Demand into the Fresh Week
For gold bugs, bullion closed the week out near an all-time high, surpassing its most recent record set the previous week and having risen five of the last six weeks fuelled by bets on Federal Reserve rate cuts and deepening geopolitical tensions. On Thursday prices jumped as much as 1.7% to $2231.83 an ounce and closed at $2229.87. While the expected pivot by the Fed is positive gold, the sharp rally over the past month has been marked by red flags of gaps higher in the price action that lacked a clear driver to justify the gains, as fresh (late) money piles in.
West Texas Intermediate futures closed above $83 a barrel on Friday, the highest settlement in more than a week as OPEC+ curbs that started last quarter continue to tighten the market. That they have extended those same curbs out to June will keep investors on edge. Evidence of this was seen last week as the curbs helped counter an increase in domestic US crude and gasoline stockpiles that had previously undercut some of the supply tightness.
