Markets Jump as Investors Assess Data Which Could Impact Global Interest Rates

  • Market Overview

Oil prices went up on Friday and were on track to post weekly gains as markets assessed new economic data from the US, Europe, and China while anticipating an Opec+ decision on supply agreements for the second quarter. “Increasing possibilities of Saudi-led Opec+ continuing with its supply cuts beyond the first quarter, and potentially until the end of 2024, are likely to keep oil prices above $80 a barrel,” DBS Bank energy sector team lead Suvro Sarkar told Reuters. The market was also supported by the expectation that Saudi Arabia would maintain the terms of the petroleum it sells to Asia at mostly unchanged levels from March to April and geopolitical tension in the Red Sea. Brent crude rose more than 1% to trade at $83.37 a barrel on Friday, while US West Texas Intermediate (WTI) for April rose 1.04% to $79.07 a barrel. For the week, Brent added around 2.40%, while WTI gained more than 4.50%.

Influenced by US dollar weakness and lower Treasury yields, along with softer US economic indicators, gold surged to over $2 080 per ounce on Friday, setting a record and heading for its second consecutive weekly gain. The US manufacturing sector continued to contract in February, while consumer surveys from the University of Michigan revealed a corresponding weakening. In addition, new statistics released on Thursday showed that January's annual growth in US inflation was the lowest in over three years.

The S&P 500 and Nasdaq reached new record highs on Friday, driven by a tech rally as the latest Personal Consumption Expenditures (PCE) inflation report eased inflationary pressures, while higher-than-expected initial jobless claims reinforced the expectation that the Federal Reserve might initiate interest rate cuts in June, according to Trading Economics. The S&P 500 posted a weekly gain of 0.97%, and the Nasdaq was up 1.74%, marking their seventh positive week out of the last eight. However, the Dow lagged by 0.11%.

European shares ended the week on a high note, buoyed by signs of disinflation on the continent. The Eurozone’s STOXX 50 added 0.30% to reach a 23-year high, while the pan-European STOXX 600 rose by 0.60% to reach a record high of 498. “New data showed that inflation in the currency bloc fell to a three-month low of 2.6% in February, broadly in line with ECB President Lagarde’s previous comments that disinflation would continue in the Eurozone,” Trading Economics added. European equities were also supported by lower Treasury yields following disappointing PMI data in the US, supporting rate-sensitive tech shares.

Asian equity markets advanced, with benchmark indexes in Australia and Japan setting fresh highs amid a strong rebound in technology stocks and expectations that major central banks will cut interest rates this year. The markets in Hong Kong and China also saw gains as investors responded to China's mixed PMI data. “Official data showed that manufacturing activity in the country contracted for the fifth straight month in February, while services sector growth hit five-month highs. Meanwhile, a private survey showed that Chinese factory activity expanded more than expected last month,” Trading Economics reported.

The FTSE/JSE All Share Index (ALSI) ended the first trading day of March flat as strength in financials was offset by losses in resource-linked stocks and industrials. On the economic front, the Absa Purchasing Managers’ Index showed a solid recovery in local industrial activity in February, following a steep contraction in the month prior. “The latest reading indicated a renewed expansion in SA’s factory output, the strongest since early 2023. In February, the business activity sub-index and new sales orders showed improvement but remained in negative territory,” Trading Economics added. The ALSI posted a weekly decline of 1.90%.

PSG Wealth Daily Investment Update, 4 March 2024

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