US Stocks Higher Again After Strong GDP – Dow up 0.6%
The soft landing, goldilocks scenario looks to be coming good for US investors with a surprise jump in GDP data confirming a strong economy yesterday sending stock markets again to new record highs. The Dow gained 0.64%, the S&P 0.53% and the Nasdaq rose 0.18% to cap yet another good day for US stocks. US treasury yields dropped on the day, the benchmark 10-year losing 5 basis points to trade back at 4.12%. The dollar was little changed against most major currencies, although gained against the Eur after the ECB kept rates on hold but confirmed a more dovish outlook. Oil jumped to 2-month highs on the back of a drop in US crude stockpiles, WTI up 2.9% to $77.25 a barrel and Gold remained in recent ranges, now trading around the $2,020.80 level.
European Central Bank Stands Firm on Interest Rates
The European Central Bank kept rates on hold yesterday at 4% as it continues to battle persistent sticky inflation, confirmed again this week with higher-than-expected PMI prints. The statement remained relatively hawkish advising that “Tight financing conditions are dampening demand, and this is helping to push down inflation”. However, traders took comments in the subsequent press conference in a more dovish light as President Christine LaGarde advised that the bank may begin lowering rates by mid-2024. The Euro dropped 0.4% on the day as the market now starts to firm its optimistic view that we could see a first rate cut by April this year. As always though, traders will be watching upcoming key data closely for any indication of a change in circumstances.
All Eyes on Fed Inflation Stats Today
It is set to be a relatively quiet start to the Asia Pacific trading session today with Australian markets closed for Australia Day. Initial investor focus will swing north to Japan later in the session as the Tokyo CPI data is due for release followed by the Monetary Policy Meeting Minutes from the BOJ. There is little of note due on the calendar in the London session but the major focus for markets will come on the New York open when the Fed’s favoured inflation data is released. The Core PCE Price Index is expected to show a month-on-month increase of 0.2% and a print significantly off that will see expectations of the timing for the much-anticipated Fed rate cut swing hard and move markets across the board.
