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Weekly Market Update (March 17, 2024)


HIGHLIGHTS

Inflation concerns were reignited after the CPI and PPI came in higher than expected. 10Y treasury yields were pushed higher as markets are expecting the Fed will not be able to cut rates aggressively. US equities dropped slightly this week.


Japan: The largest unions in Japan secured a deal for an annual wage increase from 3.8% to 5.28%, which is the steepest increase in 30 years. It is indicating that the Bank of Japan (BoJ) will hike rates and end the negative rates in the coming week.


Inflation: Consumer price index (CPI) and producer price index (PPI) reported higher than expected for two consecutive months. Markets are pricing in 3 cuts this year, down from 7 times at the beginning of the year. Fed is expected to keep the rate unchanged in the March meeting and will not cut before July.


Oil: Oil prices went up this week, mainly driven by the supply deficit forecast and transit disruption in the Red Sea. OPEC continues to cut its supply, and more concerns about supply disruption because of geopolitical issues, including Russia-Ukraine and the Red Sea. The conflict in the Rea Sea alone is expected to increase the global core inflation by 0.1%.

 
MARKETS

Nasdaq

15,973.17

-0.70%

S&P 500

5,117.09

-0.13%

Dow

38,714.77

-0.02%

10-Year

4.30%

+21bps

Brent

85.30

+3.92%

DXY

103.45

+0.69%

*Data as of market close. 5-day change ending on Friday.

 
VIEW FROM THE STREET

Equity

Standard Chartered: Indian equities hit a new record high in March. Nifty outperformed other emerging market peers over the last 12 months. It is mainly driven by strong earnings and economic growth, plus the improving macro fundamentals. Although the valuation is higher, we believe it is justified. Large caps are preferred given the higher margin of safety in earnings and valuations


Morgan Stanley: Excluding the Magnificent 7, S&P500 operating margin will probably remain challenging. Given the tailwinds of dropping energy-related prices, declining input costs and rising USD, their operating margins are still contracting.

Fixed Income

UBS: After the latest inflation reports, markets scale back the expectation of the time and extent of rate cuts. Markets are now pricing in 76bps of cuts this year, down from 160bps at the start of the year. Nevertheless, we still expect a soft landing with a decline in inflation.


Standard Chartered: The end of the BoJ negative interest rate policy will cause volatility in the yen in the short term, while it is not likely to lead to a prolonged effect on the markets as it is widely expected.


Economy

Barclays: In the US, we believe the Fed will start the cutting cycle in June, while the risk of fewer cuts is higher. In China, the progress of government bond issuance is slow, which could further delay the impact of the fiscal policy easing on the real economy.


UBS: The economic growth was reported at 2.3% in the first quarter, lower than the expectation of 2.5%. As restrictive monetary policy continues, we expect the US economy will grow at around 2%. We expect slower growth, lower inflation and a weaker job market in 2024, with a total of 75bps cuts.

 
KNOWLEDGE TRANSFER

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DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.



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