Fundamental updates by Solid ECN

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US Consumer Debt Hits $17.5 Trillion in Q4 2023​

In the US, consumer debt increased by $212 billion or 1.2% from the previous quarter, reaching a new high of $17.50 trillion in the last quarter of 2023. The amount owed on mortgages increased by $112 billion to $12.25 trillion at the end of December. Credit card debt grew by $50 billion (or 4.6%), reaching $1.13 trillion. Car loans also went up by $12 billion, continuing a rise in the second quarter of 2020 to a total of $1.61 trillion. Other types of loans, including retail cards and various consumer loans, saw an increase of $25 billion.

Student loans barely changed, with a slight rise of $2 billion, totaling $1.6 trillion. Overall, debt not related to housing increased by $89 billion. More people fell behind on their payments, with delinquency rates rising slightly. Around 3.1% of all debt was late on payments, a slight increase of 0.1 percentage points from the third quarter, yet 1.6 percentage points lower than at the end of 2019.​

 

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UK House Prices Climb to New Peak in January 2024​

Solid ECN - In January 2024, the Halifax House Price Index saw a 2.5% year-over-year increase, marking the highest point since January 2023. This rise follows a 1.8% increase the month before, boosted by lower mortgage rates, reduced cost pressures, and a strong job market. Kim Kinnaird, a director at Halifax Mortgages, noted that while there's been a boost in housing activities, interest rates are still high compared to the meager rates we've seen in the past. The demand for houses still surpasses the available supply.

The average home price in the UK has reached £291,029, £3,900 more than the previous month. Northern Ireland leads with the highest growth at 5.3%, with Scotland and Wales each seeing a 4.0% increase. London continues to have the highest average house price at £529,528. House prices increased by 1.3% from the previous month, the fourth consecutive increase and the largest in this period.​

 

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US Stock Futures Steady Amid Mixed Company Results​

Solid ECN - In the US, stock futures mainly remained unchanged on Wednesday, continuing the slight upward trend from Tuesday. This comes as investors weigh a mix of company performances and anticipate that the Federal Reserve may not lower interest rates shortly. Amgen's shares dropped by roughly 2% during premarket trading, while Uber's dropped by nearly 3% due to disappointing results. Similarly, Walt Disney saw a minor decrease of 0.9% before its earnings report, which was expected after market close.

Conversely, Ford's shares rose over 6% in premarket trading after the company projected more robust full-year earnings than anticipated. Additionally, Alibaba's US-listed shares increased by about 3% following announcing a $25 billion expansion in its buyback program. Attention is also on New York Community Bancorp after Moody's reduced its credit rating to non-investment grade.​

 

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Czech Republic's Unemployment Hits 4% in January 2024​

Solid ECN - In January 2024, the unemployment rate in the Czech Republic climbed to 4%, slightly higher than the expected 3.9% and an increase from 3.7% the month before. This rate is the highest since April 2021, with the unemployed population rising by 16,319 from the previous month to 295,546 and up 12,487 compared to last year. At the same time, job openings fell by 5,006 from December, reaching 266,783, which is 14,358 fewer than in January of the previous year.​

 

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Brazil's Currency Hits 3-Month Low Amid Economic Woes.​

Solid ECN - The Brazilian Currency fell to 5 against the US dollar in February, hitting its lowest point in three months due to weak economic indicators showing that not much foreign money was coming into the country. The trade surplus for January was decent, but it didn't meet the expectations and was the smallest in almost a year. Moreover, the foreign direct investment in Brazil went down unexpectedly in December, when it was anticipated to rise, making the situation tighter for foreign money inflow.

At the same time, China is experiencing its worst deflation in 14 years as of January, leading to worries about reduced international demand for Brazil's main exports, such as iron ore, oil, and soybeans. Despite expectations, inflation in January decreased to 4.51%, slightly more than what the central bank aims for in 2024. This situation puts the market's expectations for rate reductions by Brazil's central bank at risk.​

 

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EU Gas Prices Drop to New Low Amid Warm Winter​

Solid ECN - Natural gas prices in Europe fell to a new low of €26 per megawatt-hour, marking the lowest point since July, after dropping 7.5% the week before. This decrease is due to warmer weather predictions, high levels of stored gas, and more gas being supplied by Norway. Also, as the cold season in Europe is ending, gas prices are dropping even further.

By February 10th, the European Union had 67% of its gas storage complete, with Germany at 73%, Italy at 61%, and France at 54%. Norway's gas deliveries to Europe and Britain increased following a temporary halt at the Nyhamna gas plant. Additionally, market watchers are paying attention to an upcoming vote in the US House of Representatives that might undo a pause on approving liquified natural gas (LNG) exports set by the Biden administration.​

 

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Germany's Bond Yields Dip Amid Economic Challenges​

Solid ECN - Germany's 10-year bond yield dropped below 2.34%, a decrease from its highest in over two months at 2.38% on February 9th. This happened as investors reevaluated when and how much the European Central Bank (ECB) and the Federal Reserve (Fed) might lower interest rates this year. Germany, the biggest economy in the Eurozone, faces increasing economic challenges, limiting the central bank's ability to tackle inflation. In December, the country saw its industrial production decline at the quickest rate in nine months. January's PMI data indicated that private sector activity has been falling for seven consecutive months.

However, central bank officials have advised against expecting the bank to ease up on controlling inflation to support economic growth. For instance, Chief Economist Lane and the head of the Belgian central bank, Wunsch, have stated the importance of waiting for more proof that inflation is moving towards the 2% goal before making any changes to interest rates, even though there's a growing belief that inflation pressures are starting to lessen.​

 

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US Inflation Rate Drops to 2.9% in January 2024​

Solid ECN - It's likely that the US's yearly inflation rate dropped to 2.9% in January 2024, marking the lowest rate since March 2021, after a short rise to 3.4% in December. Expectedly, the cost of consumer goods might increase by 0.2% from December, which aligns with the adjusted growth seen in the last two months.

Furthermore, the yearly rate of core inflation, which excludes food and energy prices, is predicted to decrease to 3.7%, the smallest since April 2021, down from 3.9% in December. The monthly core inflation rate is expected to stay constant at 0.3%. This comes as inflation continues to decrease from its peak of 9.1% in June 2022, the highest since the early 1980s.​

 

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US Stocks Fall as Inflation Surprises Market​

Solid ECN - On a recent Tuesday, the three extensive US stock indexes - the S&P 500, Dow Jones, and Nasdaq - all fell. The S&P 500 dropped more than 1%, the Dow Jones went down over 300 points, and the Nasdaq decreased almost 2%. This happened because the inflation rate in the US was higher than what people thought it would be. This made investors think twice about whether the Federal Reserve would lower interest rates in March and May. The yearly inflation rate dropped to 3.1%, but people thought it would drop even more to 2.9%.

Also, the yearly core inflation was 3.9%, higher than the expected 3.7%. Consumer prices increased by 0.3% compared to the month before, and the core rate went up to 0.4%, both more than expected. The real estate and tech sectors both went down about 2%. Stocks of big tech companies like Microsoft, Amazon, NVIDIA, and Alphabet also dropped nearly 2%. But, Coca-Cola did well and went up about 2% after they reported earnings that met expectations and revenue that was higher than expected.​

 

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S&P/TSX Composite Index Gains: Metals & Oil Surge​

Solid ECN - The S&P/TSX Composite index increased by 0.8% to just over 21,070 on Thursday. This increase marked the second day of gains, helped by the excellent performance of companies dealing with precious metals and oil. New data from the US on shopping habits suggested the economy might not be as strong as thought, causing more people to invest in US government bonds and gold.

Shares of Barrick Gold rose by more than 2.5%. The energy companies on the Toronto Stock Exchange also did well, with an average increase of 1.4% in their value as oil prices went up after a significant fall the day before. Cenovus Energy stood out in the energy field, with its share price increasing by more than 3.5% thanks to better earnings than expected. In the same way, Manulife Financial's stock jumped nearly 7% after announcing earnings that far exceeded predictions.​

 

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UK Retail Sales Surge in January 2024​

Solid ECN - In January 2024, the UK saw a significant jump in retail sales, increasing by 3.4% from the previous month after a sharp decline of 3.3% in December. This increase surpassed the expected 1.5% rise and marked the most significant monthly growth in retail since April 2021. This growth spanned across most sectors except for clothing stores. Food store sales, particularly in supermarkets, increased by 3.4%, recovering from a 3.1% drop in December. Sales in non-food stores also saw a rebound, improving by 3.0% after a 3.9% fall in December.

Specifically, department stores and other specialized stores, like those selling sports equipment, enjoyed increases of 5.4% and 6.2%, respectively. This was partly attributed to the beneficial effects of January sales events. Sales in stores selling household goods, especially hardware stores, rose by 1.8%, whereas clothing stores experienced a 1.4% decrease. Furthermore, sales of automotive fuel saw a significant rise of 5.4%, aided by lower fuel prices.​

 

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Aluminum Prices Dip Amid Global Demand Concerns​

Solid ECN - Aluminum prices dropped to around $2,200 per ton in February, the lowest in a month, due to growing negativity around the demand for metals worldwide. Recent reports from China, the leading buyer, show a weakening economy and lower consumer interest, affecting the expected purchases by major producers. The situation worsened as the UAE stepped in to help with the export of bauxite from Guinea following an explosion at a fuel tank, which posed risks to aluminum production logistics.

Meanwhile, the market is also considering how new EU sanctions on Russian aluminum could affect its availability. These sanctions could expand the existing prohibitions on various aluminum products. However, the European Aluminium association mentioned that the current sanctions cover only 12% of the EU's aluminum imports, leading to calls for a broader ban.​

 

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Saudi Arabia's Dec 2023 Trade Surplus Dips Amid Lower Sales​

Solid ECN - In December 2023, Saudi Arabia's trade surplus shrank to SAR 38.2 billion from SAR 44.2 billion the year before. The country's exports dropped by 9.7% to SAR 98.5 billion, mainly due to a 15.8% decrease in oil product sales, which make up 73.1% of total exports. Also, non-oil product exports decreased by 3% to SAR 19.15 billion, with a significant fall in plastics and rubber goods sales by 7.6%.

The main export destinations were China (14.8%), Japan (11%), and India (8.8%). On the other hand, imports decreased by 7.1% to SAR 60.4 billion, though there was a rise in the intake of machinery, appliances, and electrical gear by 21.5% and transportation equipment by 20%. China was the largest source of imports, accounting for 21%, followed by the US (8.1%) and UAE (7.8%).​

 

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Market Dynamics: DAX 40's Ascending Trajectory​

The Frankfurt DAX 40 index witnessed a moderate uplift of 0.4%, reaching near-record levels amidst varied earnings reports. This upward movement comes as the market holds its breath for Nvidia's impending quarterly disclosures and the forthcoming details from the US Federal Reserve's January assembly.

This situation reflects the investors' balancing act between optimism driven by promising corporate performances and caution due to economic uncertainties. Adding value to this context, understanding the impact of such high-profile earnings reports and Federal Reserve minutes can offer insights into market sentiment and future trends, potentially guiding investor strategies in the short to medium term.​

Healthcare Sector Highlights: Fresenius' Mixed Fortunes​

Fresenius emerged as a topic of interest in the healthcare domain, with its shares experiencing minimal fluctuations after an initial surge due to a robust quarterly performance. The German healthcare conglomerate reported a 13% increase in its fourth-quarter operating earnings, surpassing its 2023 cost-efficiency goals. This success story demonstrates Fresenius' operational resilience and strategic planning and offers a learning point on the importance of fiscal management and innovation in healthcare.

Conversely, Fresenius Medical Care faced challenges, with a notable dip in its market standing, attributed to analysts' concerns over dwindling patient volumes, highlighting the sector's vulnerabilities and the critical need for adaptive business models in changing market conditions.​

Anticipations and Speculations: Allianz's Promising Horizon​

Meanwhile, anticipation surrounds Allianz as its shares climbed to a peak not seen in over twenty years, ahead of its upcoming earnings release. This optimism among investors signifies confidence in Allianz's financial health and prospects. The scenario underscores the influence of forward-looking economic indicators and the weight of investor expectations on stock prices.

Additionally, this anticipation suggests a broader trend where robust financial health and positive future outlooks of companies like Allianz can act as catalysts for market confidence, potentially driving sector-wide gains and offering opportunities for investors to diversify and strengthen their portfolios in the face of market uncertainties.​

 

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Offshore Yuan's Rise Amid Weakening Dollar​

Solid ECN – The offshore yuan has seen a notable appreciation, reaching its highest level in three weeks, climbing toward 7.20 against the dollar. This rise is primarily attributed to the dollar's decline amid increasing uncertainties regarding future interest rate decisions in the United States. Additionally, the Chinese currency is riding a wave of positive sentiment as investors show renewed interest in Chinese markets. This is evidenced by the significant upswing in mainland stocks, which have soared their highest points in two months. This surge in investor confidence and currency value reflects a broader trend of optimism in Chinese financial assets.​

China's Aggressive Monetary Easing​

In a move that surprised many, the People's Bank of China (PBOC) significantly reduced its five-year loan prime rate by 25 basis points, bringing it down to 3.95%. This decision exceeded the expectations of a modest 15 basis points cut and marked the most substantial reduction since this rate's inception in 2019. The aggressive cut underscores China's intensified efforts to stimulate economic growth amidst various domestic and global challenges. However, the PBOC opted to maintain the one-year loan prime rate at 3.45%, indicating a nuanced approach to monetary policy. These measures are part of a broader strategy to invigorate the Chinese economy, reflecting a balanced mix of short-term stability and long-term growth initiatives.​

Unleashing Capital for Growth​

Earlier in the month, the PBOC took another significant step by reducing the reserve requirements for banks by 50 basis points. This strategic decision has released approximately 1 trillion yuan in long-term capital, aiming to lubricate the economy's gears by enhancing liquidity and encouraging lending. This substantial capital is anticipated to bolster economic activities, support small and medium-sized enterprises, and stimulate consumer spending. By easing the reserve requirements, the PBOC is providing banks with a greater capacity to finance business projects and consumer needs, thereby fueling the overall growth trajectory of the Chinese economy amidst evolving global financial landscapes.​

 

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Market Downturn: Sensex Faces Decline​

Solid ECN – The Bombay Stock Exchange's Sensex experienced a notable drop, descending over 350 points, a reduction of approximately 0.5%, to settle at 72,790.13 on Monday. This downturn marked the continuation of a losing streak, primarily influenced by investors opting to cash in their profits amidst a globally cautious atmosphere.

This phenomenon can often be attributed to broader market trends and the psychological impact on investors seeking to secure gains amidst uncertain global conditions. The scenario was also affected by market dynamics, such as the anticipation of significant economic announcements and geopolitical factors that typically lead to conservative trading behaviors.

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Sectorial Impact: Major Players and Market Movements​

In sector-specific developments, Asian Paints emerged as the primary laggard with a 3.9% decrease, further deepening its losses following Grasim Industries' recent foray into the paint sector. This move by Grasim signifies a potential shift in market dynamics and increased competition in the industry, which investors are closely monitoring.

Additionally, sectors like technology, financial services, and steel faced setbacks, highlighting a broader market apprehension. Conversely, Larsen & Toubro, an engineering and construction giant, bucked the trend by advancing 2.4%, fueled by optimistic projections of increased orders following recent elections. This suggests a sectoral divergence where certain industries may benefit from specific socio-political changes, reflecting the complexity of market forces.
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Anticipating Economic Indicators: A Week Ahead​

The trading community is currently on edge, anticipating a slew of economic data expected to be released throughout the week. Notably, all eyes are on the US Personal Consumption Expenditures (PCE) price indexes for January, which serve as the Federal Reserve's preferred inflation metrics, scheduled for release on Thursday. These figures are pivotal as they provide insights into inflationary trends and can influence the Fed's monetary policy decisions.

Additionally, the release of China's Purchasing Managers' Index (PMI) and upcoming speeches by Federal Reserve officials are likely to be critical focal points. These events could significantly impact global market sentiments and trading strategies, offering valuable clues about the direction of significant economies and monetary policy landscapes. Investors are advised to stay informed and adopt a cautious approach in anticipation of these updates, as they could herald substantial shifts in market dynamics.​

 

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US Building Permits Dip Slightly in January 2024​

Solid ECN – In January 2024, the US saw a slight drop in building permits by 0.3%, adjusting to 1.489 million from the previous month's 1.493 million, yet this was still above the early estimate of 1.470 million. The permits for more significant developments, specifically those with five or more units, decreased significantly by 5.8% to 419 thousand, marking the lowest point since October 2020.

However, there was a positive turn in the permits for single-family homes, which climbed 2.2% to reach a 20-month peak of 1.021 million. Geographically, permit numbers went down in the South by 7.8% to 793 thousand but rose in other areas: 0.3% to 339 thousand in the West, 5.6% to 208 thousand in the Midwest, and a substantial 52% to 149 thousand in the Northeast.​

 

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Oil Prices Drop Amid Demand Worries and Middle East Tension​

Solid ECN – WTI crude oil dropped to approximately $76 per barrel on Monday, continuing the downward trend from the previous session due to concerns over demand. Market experts highlight fears that unexpectedly high inflation in the US might postpone the Federal Reserve's cut in interest rates, which could further reduce demand.

In China, the largest importer of crude, the future demand remains uncertain despite the government's attempts to increase consumption. On the supply front, market participants are keeping an eye on the Middle East due to ongoing assaults on Red Sea shipping by the Iran-aligned Houthis. However, the conflict between Israel and Hamas has not had a significant impact on oil supply yet.​

 

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Canadian Dollar Drops, Rate Cuts Likely: Economic Update​

The Canadian dollar dipped below 1.35 against the US dollar towards the end of February, driven by increasing chances of upcoming rate reductions from the Bank of Canada within the year. The currency also suffered from negative forecasts for incoming foreign funds as oil prices dropped further due to declining worldwide demand. Additionally, the main inflation rate in January decreased to 2.9%, a sharp drop from the previous 3.4% and lower than the anticipated 3.3%.

The Bank of Canada's trimmed-mean core inflation rate also went down, reaching a low not seen in two years. This decline bolstered those in the Governing Council who favor lower rates, hence raising the likelihood of the bank's initial rate decrease during this year's second quarter. Moreover, officials highlighted how high-interest rates have been affecting overall spending in Canada.​