Global economic data of the week: Jan 29 – Feb 2, 2024

This week, the FOMC convenes for its first meeting of 2024.

While any cuts are unlikely at this juncture, market watchers will be looking for indications of when easing may commence.

Moreover, the Red Sea tensions are taking centre stage with escalating violence in the region.

Chinese markets are on edge as Evergrande, crushed under $300 bn of liabilities has been ordered to undergo liquidation, although the Hang Seng and the Shanghai Composite have remained in positive territory today owing to fresh regulatory measures to support the weakness in equities.

In addition, the Bank of England will also be announcing its policy decision this week on the back of highly positive PMI data.

5-day performance

In the United States, the S&P 500 continues to record new highs, while it ended the week up by 1.1%, extending its 3-month gains to 18.8% as compared to 14.6% at the end of the previous week.

The momentum was supported by AI and technology stocks even as policy rates are widely expected to remain unchanged in the Fed’s month-end meeting.

However, the index snapped a six-day winning streak after being dragged down by the spillover of Tesla’s weak Q4 earnings, and the performance of Intel and chip-maker KLA on weaker-than-anticipated results.

Fueled by the week’s tech rally, the tech-heavy NASDAQ was also up 0.9% over the previous five trading sessions, but gains were capped by disappointing earnings reports on Friday which resulted in a (-)0.4% decline on the day.

Year-to-date, the two indexes are up 2.6% and 3.0%, respectively.

The previous week also saw the release of US Q4 GDP which decelerated to 3.3% YoY, well above consensus estimates of 2.0%.

Fed policymakers were also likely encouraged by core PCE moderating to 2.9% YoY, although the CPI unexpectedly rose to 3.4% YoY.

In the upcoming meeting, rates are expected to remain unchanged but markets will be on the lookout for any indications of the timing of policy easing.

In Friday trading, the FTSE 100 rose a healthy 1.4% to 7,635.1, marking a 2.3% improvement over the previous 5 sessions.

The surge was in response to improved PMI numbers which peaked at a 7-month high amid fears that the UK may have already entered a technical recession.

Despite the trouble brewing in Europe, and the challenges of added costs of disruption in the Red Sea, the German DAX was up 2.5% for the previous week, while France’s CAC 40 improved by an even stronger 3.6%.

On the technical front, the DAX reportedly found momentum as it was approaching the January high of 16,785.

At the time of writing, Japan’s Nikkei 225 is trading 1.0% higher on the day; while the Hang Seng Index improved by 0.9%; and the Shanghai Composite Index is also higher by a muted 0.3%.

Japanese equities are down (-)1.2% over the previous five sessions and have continued to slip since Tuesday when the BoJ elected to leave its policy unchanged.

Monetary policymakers did not reveal any additional information on when they may look to exit negative interest rates.

Today’s enthusiasm for the Chinese market is in stark contrast to Evergrande-led headwinds, as well as high levels of accumulation of local debt, and long-term declines in demographic dynamism.

In addition, overseas analysts have been sceptical of the recently released official GDP data which showed an increase of 5.2% in 2023.

Over the course of twelve months, the Hang Seng and the Shanghai market have both been beaten down by 27% and 11%, respectively.

Bonds, commodities, and currencies

In bond markets, US 10-year yields are still firmly above 4.1%, while German bunds and Italian yields were trading at 2.3% and 3.8%, respectively.

Among commodities, in oil markets, the WTI and Brent enjoyed a bullish improvement of 4.6% and 4.5%, respectively over the previous five sessions.

The rise follows a larger-than-anticipated decline in US crude inventories and reduced production figures, while tensions have continued to intensify in the Red Sea.

Year-to-date, the oil markets are up 10.1% and 8.3%, respectively, and are trading on either side of the $80 mark.

Gold prices were relatively unchanged, rising 0.1% over the previous five trading sessions, but are down by 2.2% YTD, powered by an improvement in the greenback.

On the currencies front, the dollar index (DXY) was relatively unchanged in the previous five trading sessions but is 2.1% higher over the previous month and is currently trading near 103.5 levels.

The EURUSD traded in a zigzag pattern over the previous five days staying between 1.0813 and 1.0934, eventually dipping (-)0.4%.

The GBPUSD was virtually flat easing (-)0.05% over the course of the previous five trading sessions, while the USDJPY was priced at 147.8 at the time of writing, declining by (-)0.2% on the week.

Key events of the week

Following the Bank of Japan, Bank of Canada, and ECB policy rate announcements, this week will see both the Bank of England (Thursday, Feb 1) and the Federal Reserve’s FOMC (Wednesday, Jan 31) convene for their first meetings of 2024.

In what is a crucial week for the United States, January 2024 numbers for the employment situation (Friday, Feb 2) shall also be released.

These include the crucial nonfarm payrolls, the unemployment rate, and the average hourly earnings. The resilience of the labour market has been central to the Fed’s willingness to keep rates elevated.

On the homes front, tomorrow (Tuesday, Jan 30) shall also see the release of the FHFA Home Price Index and the S&P/Case-Shiller Home Price Index both for November 2023, as well as the JOLTS report on jobs data.

In other key US data, construction spending for December (Thursday, Feb 1), factory order data (Friday, Feb 2), the ISM Manufacturing PMI (Thursday, Feb 1), as well as the University of Michigan’s sentiment gauge (Friday, Feb 2) for the month of January 2024.

These inputs will be important in determining the Fed’s future rate trajectory following better-than-anticipated Q4 GDP data.

Following the ECB’s decision to leave rates unchanged even as French, German, and European PMIs continued to contract, European GDP (Tuesday, Jan 30), unemployment and, inflation data (Thursday, Feb 1) will also be released. Markets remained uncertain about the ECB’s likely rate trajectory in 2024.

A flurry of GDP data shall also be published from France, Italy, and Spain (Tuesday, Jan 30).

Markets shall also monitor German unemployment (Wednesday, Jan 31), GDP, retail sales, and inflation numbers, alongside French inflation data.

Much like the projected slowdown in the European Area, the UK was expected to be heading for a technical recession amid ongoing inflationary concerns, although recent PMI data suggested that underlying economic activity is likely to exceed expectations.

In a big week for the real estate sector, the UK will publish mortgage data (Tuesday, Jan 30), and nationwide house prices (Wednesday, Jan 31), in the run-up to the BoE policy meeting.

On the earnings front, this week will see Ryan Air (Monday, Jan 29), Microsoft (Tuesday, Jan 30), Google (Tuesday, Jan 30), Pfizer Inc. (Tuesday, Jan 30), AMD (Tuesday, Jan 30), GSK (Wednesday, Jan 31), Apple Inc (Thursday, Feb 1), Exxon Mobile (Friday, Feb 2) and AbbVie (Friday, Feb 2) announce results.

Disclaimer: Prices and data may only be indicative and are not to be utilised for trading decisions.