Fundamental updates by Solid ECN

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Aluminum Soar to New Highs Amid Supply Challenges in China​

Solid ECN – Aluminum prices climbed above $2,270 per tonne, reaching their peak since January 31st. This jump was fueled by encouraging reports from China, sparking expectations of increased demand. In the first two months of 2024, China's industrial activities expanded by 7% compared to the previous year, beating the predicted 5%. This growth was reflected in primary aluminum production, which rose by 5.5%, driven by high prices that encouraged more production.

Additionally, China saw a significant boost in its imports of unwrought aluminum and related products, with figures skyrocketing by 93.6% to 720,000 tons compared to the same timeframe last year. In line with this, aluminum stocks in SHFE-monitored warehouses saw a substantial increase of around 80% in February alone.

However, production faced hurdles in Yunnan, one of China's top aluminum-producing areas, due to ongoing production restrictions linked to the annual dry season. Despite these challenges, production will pick up once power supply issues are resolved. Yet, the output growth might be held back by the limited boost in power availability and the planned maintenance at several smelters.​

 

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Rising Russian Crude Oil Prices and Global Impacts​

Solid ECN – Russian Urals crude oil prices have recently climbed above $77 a barrel, approaching the high levels seen in October, and are following the general upward trend of global oil prices. Meanwhile, China is on track to bring in a historically high volume of Russian oil this month, although the quantity heading to India has fallen, as reported by Bloomberg.

Despite being targeted by recent attacks, Russia aims to increase its oil exports via western ports, thanks to extra shipments from companies like Rosneft and Tatneft. In December 2022, a price limit of $60 per barrel was set on Russian oil by the European Union, the G7 nations, and Australia. This measure aims to cut down the funding Russia receives for military operations in Ukraine.​

 

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WTI Crude Oil Prices Soar Amid Global Supply and Demand Dynamics​

Solid ECN – WTI crude oil prices remained above $82 per barrel on Tuesday, close to their peak since the start of November, boosted by concerns about supply. The reasons include Ukraine's recent drone attacks on three of Russia's oil refineries, which represent over 10% of Russia's oil refining capability. Meanwhile, in the Middle East, Iraq has said it will cut back its oil exports to 3.3 million barrels per day in the upcoming months to make up for going over its OPEC+ limit since January.

Additionally, Saudi Arabia's oil exports dropped for the second month in a row, reaching 6.297 million barrels per day in January, down slightly from December. On the other side, demand appears strong, with China, a major oil buyer, showing solid growth in industrial output and retail sales. The overall global demand for oil is also expected to remain robust this year.​

 

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Euro Drops as ECB Considers June Rate Cut Amid Slow Growth​

Solid ECN – The euro fell toward the $1.08 mark, its lowest since March 1st, as investors processed reports of slower wage increases and cautious remarks from some European Central Bank (ECB) officials. They also looked forward to the Federal Reserve's policy meeting on Wednesday. ECB Vice President Luis de Guindos stated on Tuesday that the bank might consider lowering interest rates in June, highlighting the need for more information before changing policies.

ECB President Christine Lagarde mentioned possibly lowering rates earlier in the month due to falling inflation. The ECB's chief economist, Philip Lane, suggested a rate cut could come in the second quarter. Significantly, central bank leaders from Spain, the Netherlands, Ireland, Greece, and Slovakia, among the ECB's 26 Governing Council members, supported a decision in June.​

 

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Recent Trends in NZDUSD​

Solid ECN – The New Zealand dollar fell below $0.605, reaching close to its four-month low following the Australian dollar's downturn. This happened after the Reserve Bank of Australia decided not to change interest rates, a decision many anticipated. They also removed their previous caution against ruling out future rate hikes. Meanwhile, the Kiwi dollar faced additional pressure due to the upcoming policy meeting of the US Federal Reserve. There's the worry that persistently high inflation in the US might postpone any cuts in Fed rates.

Furthermore, within New Zealand, the expectation is growing that the Reserve Bank of New Zealand may reduce its policy rates starting in August as the rise in prices begins to slow down. As investors wait, they are particularly interested in the upcoming report on the country's economic growth, hoping it will offer more clarity.​

 

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Euro Rises as Central Banks Discuss Future Rate Cuts​

Solid ECN – On Wednesday, the euro climbed to $1.09, bouncing back from its lowest point in two weeks after the Federal Reserve decided not to change its plans for interest rate reductions in 2024. The Fed did not alter interest rates in March, meeting expectations, and hinted at three possible decreases later in the year. Also, the ECB's President Lagarde emphasized in an earlier meeting that they would look at reducing rates in June.

She added a note of caution, stating that the European Central Bank wouldn't lock itself into a set number of cuts, as future decisions will be based on the latest data. Central bank leaders from five countries—Spain, the Netherlands, Ireland, Greece, and Slovakia—have expressed their support for action in June.​

 

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Yen Gains Strength as Japan Considers More Rate Hikes​

The Japanese yen strengthened, going above 151 against the dollar after previously hitting a four-month low. This happened as the dollar fell, following the US Federal Reserve's repeated signals of planning three interest rate cuts this year. Additionally, there's a growing belief that the Bank of Japan might increase its rates shortly, thanks to a brighter economic forecast.

Also, Japan's Finance Minister, Shunich Suzuki, expressed urgent concern over the yen's significant rise after it crossed the 151 per dollar mark. At the same time, BOJ Governor Kazuo Ueda informed the parliament that, despite a recent change, the bank's monetary approach will stay mainly supportive for now.

Just earlier, the central bank raised its rates from -0.1% to 0%, marking its first hike since 2007. This ends an eight-year period of negative interest rates, driven by growing wages and high inflation. Furthermore, the BOJ has stopped its policy of controlling the yield curve and has ceased buying ETFs and J-REITs while scaling back on bond purchases.​

 

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Dollar Stays Strong as Fed and Global Banks Signal Changes​

Solid ECN – On Thursday, the dollar index was close to 103.8, just shy of its three-week peak, following the Federal Reserve's decision to maintain the fed funds rate. The Fed also hinted that it might reduce rates three times this year.

Additionally, Chair Powell mentioned that recent inflation data from January and February hasn't changed the overall inflation outlook. Meanwhile, the Bank of England is also considering reducing rates, as evidenced by two members no longer advocating for an increase.

In a surprising move, the Swiss National Bank cut its borrowing costs by 25 basis points, becoming the first major central bank to relax its monetary policy recently. As a result, the dollar strengthened, especially against the euro, pound, and Swiss franc.​

 

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British Pound Falls Amid Economic Challenges in the UK​

Solid ECN – The British pound dropped to about $1.26, marking its lowest point since February 19th. This happened because people in the UK stopped spending more in February, and the head of the Bank of England, Andrew Bailey, suggested there might be cuts in interest rates later this year. The Office for National Statistics reported that shopping numbers in the UK didn't change last month.

This was a significant change from January's 3.6% increase and was different from what people thought would happen; they expected a 0.3% drop. At the same time, Bailey did say there were signs that prices were going up less quickly, but he also said it's essential to be sure before making decisions about how to handle the situation.

The Bank of England decided to keep the cost of borrowing money very high, at 5.25%, the highest it's been in 16 years. They made this decision with almost everyone agreeing, even though two people changed their minds about wanting to increase it. This choice was made after seeing that prices weren't rising as fast as before, which hasn't happened in over two years, but prices are still higher than the bank wants.​

 

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Hang Seng Index Falls, Tech Stocks Drop Amid Economic Uncertainty​

Solid ECN – On Friday, the Hang Seng Index took a sharp dive, falling by 363.63 points or 2.16%, closing at 16,499.48. This drop contributed to a weekly decline of 1.32%, mainly due to disappointing company profits in Hong Kong. Specifically, the technology sector faced a significant setback, dropping by 3.5%—the biggest fall in over two weeks. This was after a pessimistic forecast from the American tech company Accenture. Additionally, sectors like real estate, consumer goods, and finance saw declines, affected by the unclear prospects for China's recovery, despite an initial increase in activity during January and February.

Furthermore, Hong Kong experienced a rise in inflation to 2.1% in February, up from the 10-month low of 1.7% observed in January, primarily because of rising food costs. On the other hand, US stock futures remained stable following Wall Street's setting of new records, influenced by the Federal Reserve's hint at three potential rate reductions this year.

In individual company news, Li Auto's shares dropped 11% after the company revised its electric vehicle delivery expectations downward for the first quarter of 2024. CK Asset Holdings also saw a significant decrease of 10.7% after reporting decreased net profits for 2023 and reduced dividends. Other stocks that did not perform well include JD Health International (down 12.6%), Shenzhou International (down 7.1%), and Semiconductor Manufacturing (down 5.5%).​

 

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Canadian Dollar Falls Amid Global Economic Changes​

Solid ECN – In March, the Canadian dollar fell below 1.36 against the US dollar, reaching its lowest in almost four months. This drop was caused by robust economic data from the US, which suggests the Federal Reserve will keep its strict monetary policies. Additionally, Europe's central banks are becoming more cautious, which makes the US dollar more attractive. Surprises like the Swiss National Bank reducing its rates by 25 basis points and the Bank of England's careful stance also made people want to buy more US dollars.

In Canada, the latest information showed a slight increase in retail sales by 0.1% in February 2024, an improvement from a 0.3% decrease in January. Meanwhile, Deputy Governor Toni Gravelle confirmed plans to tighten the economy's money supply by 2025. He believes this approach will work well alongside gradual cuts in interest rates. However, the Bank of Canada's top officials are still debating when to lower rates, considering the economic situation and inflation concerns.​

 

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Gold Prices Near Record Highs Amid Rate Cut Expectations​

Solid ECN – On Monday, the price of gold remained steady around $2,175, nearing its record high of $2,185 set on March 20th. This stability comes amid increasing bets on the Federal Reserve reducing interest rates. Recently, the Fed kept its forecast, expecting to lower rates three times in 2024, making gold more attractive. Moreover, investors now believe there's over a 70% likelihood that the Fed will cut rates in June, a jump from the 55% probability anticipated before their latest meeting.

This week, all eyes are on important U.S. inflation data and speeches from several Federal Reserve officials for further indications of future monetary policies. Additionally, ongoing conflicts in Russia and the Middle East support gold's status as a reliable safe-haven asset.​

 

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Gold Prices Surge Amid Global Tensions​

Solid ECN – On Tuesday, the price of gold climbed to a new peak, approximately $2,190 per ounce. This increase was mainly due to the weakening of the US dollar. Investors are anticipating rate cuts, especially with the upcoming US PCE price index report expected this Friday. Following last week's announcement by the Federal Reserve, which kept its prediction of three interest rate cuts for the year, gold became more attractive.

However, February saw better-than-expected US durable goods orders, and various Federal Reserve officials have voiced concerns regarding persistent inflation and a strong economy. Currently, there's a roughly 70% expectation among markets that the Federal Reserve will begin to lower rates in June, a notable increase from the 55% likelihood anticipated before their last meeting.

Additionally, gold's status as a secure asset is bolstered by rising geopolitical tensions in the Middle East and Eastern Europe, underscored by the UN Security Council's call for an immediate ceasefire in Gaza.​

 

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Silver Prices Hold Steady as Investors Eye Fed Moves​

Solid ECN—Silver prices have stabilized above $24.5 per ounce after hitting almost a one-year high on March 20th. This happens while investors wait for speeches from the Federal Reserve's officials and the key PCE inflation data this week. These events will help them predict if the U.S. will start easing its monetary policy soon. Before this, the U.S.'s main financial authority decided not to change its plan for three interest rate decreases in 2024.

This decision made silver and similar assets without yield more attractive. Since their last meeting, the likelihood of reducing interest rates in June has increased to about 70% from the previous 55%. Meanwhile, the Swiss National Bank was among the first big banks to begin reducing its policies in Europe. Silver continues to be supported as a safeguard against global political tensions, mainly due to ongoing conflicts in Ukraine and the Middle East. Recently, Russia has significantly attacked Ukraine's energy infrastructure.​

 

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Euro's Stability and Expected ECB Rate Cuts​

Solid ECN – By the end of March, the euro held steady at about $1.08 but was on track to lose almost 2% over the quarter compared to the US dollar. This change came after the European Central Bank (ECB) took a more cautious approach. ECB member Piero Cipollone mentioned that the bank is now more hopeful that inflation will drop to its goal of 2% by mid-2025, thanks to slowing wage increases.

This supports the case for reducing interest rates. Investors are now expecting the ECB to lower rates in June, but there's debate over whether there will be two or three more cuts by the end of the year. On the other hand, the dollar kept up its recent strength. This is because investors are less sure the Federal Reserve will make big cuts to interest rates. Their doubts come from strong economic signs in the US and careful comments from its central bankers.​

 

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GBPUSD Drops, Awaiting Bank Decisions​

Solid ECN – In late March, the British pound fell to just above $1.26, its weakest since February 19, and was on track to lose almost 1% over the quarter compared to the US dollar. This happened as investors paid careful attention to cautious words from bank officials. Fed Governor Waller mentioned that the latest inflation figures back the idea that the US Federal Reserve might not soon lower its short-term interest rate goal, though he didn't rule out cuts later in the year.

In Britain, Bank of England's Haskel stated that it's too soon to consider rate cuts, and his colleague Mann warned against expecting too many rate reductions this year. She suggested it's unlikely the UK would reduce rates before the US.

During its March session, the Bank of England kept its interest rates the same. Two members, who had earlier supported increasing rates, now preferred to wait, leading to a softer approach than many had predicted.​

 

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Oil Prices Peak Ahead of OPEC+ Meeting​

Solid ECN – On Monday, WTI crude oil prices climbed to about $83.5 a barrel, reaching their highest point in five months. This surge comes as investors eagerly await the upcoming joint ministerial OPEC+ meeting this week. At this meeting, the group plans to examine the current state of the market and how well members are sticking to their production goals.

They are expected to decide to keep their current production levels the same. The Russian Deputy Prime Minister Alexander Novak mentioned last Friday that Russian oil companies should focus more on reducing their oil production than their exports during the second quarter. This is part of Russia's efforts to align with OPEC+'s production targets.

In addition, the market is also paying close attention to how Ukrainian drone attacks on Russian oil facilities and the peace negotiations in Gaza might affect the oil supply.

On the demand side, there's some positive news: recent data revealed that China's manufacturing sector grew in March for the first time in six months, a development that could mean stronger demand for oil from the world's largest importer of crude oil.​

 

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Euro Area Inflation Expectation Hits New Low​

Solid ECN – In February 2024, investors in the Euro Area expected inflation to drop to 3.1% over the next year—the lowest since the Ukraine war began.

According to the ECB Consumer Expectations Survey, this is a slight drop from the 3.3% expectation in January. However, investors' outlook for inflation three years from now stayed the same at 2.5%, and they're just as unsure about future inflation as before.

Traders also think their home prices will increase by 2.4%, slightly from January's 2.2% expectation. But, their views on mortgage interest rates haven't changed, staying at 5.1%. They're also a bit more optimistic about making more money, expecting a 1.4% increase in income, up from 1.2%. Expectations for how much they'll spend didn't change, staying at 3.7%.

Predictions for the economy's growth and unemployment rates over the next year haven't budged, remaining at -1.1% for growth and 10.9% for unemployment.​

 

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Germany's Inflation Drops to Lowest Since 2021: March 2024 Update​

Solid ECN – In March 2024, Germany experienced a slight decrease in consumer price inflation, reaching 2.2% from the 2.5% seen in February. This drop met the expectations of many, marking the lowest inflation rate since May 2021 and edged closer to the 2.0% goal set by the European Central Bank.

The inflation rate that aligns with the rest of the European Union also went down to 2.3%, the smallest figure in almost three years and just below the anticipated 2.4%. The rate at which prices for goods went up cooled down significantly to 1.0% from 1.8% due to energy prices falling more quickly (-2.7% compared to -2.4%) and a notable drop in food prices, the first decline since February 2015 (-0.7 compared to a rise of 0.9%).

On the other hand, services costs went slightly up, reaching 3.7% from 3.4%. The core inflation rate, which does not consider fluctuating prices for food and energy, also decreased to 3.3% in March, its lowest since June 2022. This shift indicates a movement towards stabilizing prices.​

 

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European Stocks Dip Amid US Economic Data & Investment News​

Solid ECN – On Tuesday afternoon, European stock markets saw further declines. Specifically, the STOXX 50 fell by 0.5% to 5,055 points, while the broader STOXX 600 dropped 0.7%, moving away from its highest point ever.

This downturn was triggered by new data from the US, which showed job openings and factory activity in February were stronger than many had anticipated. This information has increased worries about when the Federal Reserve might decide to lower interest rates. Following this, a PMI survey revealed that US manufacturing activity in March bounced back unexpectedly.

Regarding other economic news, Germany's inflation rate fell to 2.2% last month, the lowest since mid-2021. Despite this decrease, the core inflation rate only reduced to 3.3%, mainly because of a rise in the cost of services.

On the business side, UBS announced a new program to buy back up to $2 billion of its shares, with plans to carry out half of this in 2024. Moreover, the Swedish steel company SSAB is planning a significant investment of €4.5 billion to build a new, environmentally friendly mini-mill.​