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US stocks recover after last week’s selloff

 

Tuesday, February 28, 2023, 8.45am GMT

The news shaping the markets today

Ukraine’s President Volodymyr Zelensky said the situation in the city of Bakhmut is worsening. Continued geopolitical tensions sent the safe-haven US dollar index higher this morning.


Australia’s retail sales climbed by 1.9% to A$35.09 billion in January, topping market expectations of 1.5%, which lent support to the AUD/USD forex pair.


Japan’s industrial production fell by 4.6% in January, higher than market estimates of a 2.6% drop, sending the JPY/USD pair lower in forex trading this morning.


New Zealand’s ANZ Business Outlook Index rose to -43 in February, from -52 in the previous month, lending support to the NZD/USD forex pair.


Singapore bank loans fell to a 15-month low of S$807.1 billion in January, which sent the SGD/USD pair slightly higher in forex trading this morning.

 

What’s happening: US stocks began the week on a positive note.

What happened: The major Wall Street indices rebounded on Monday after recording their biggest percentage declines of the year.

Investors also assessed the latest economic reports amid concerns of a tighter monetary policy.

Why it matters: US stocks recorded losses on Friday, with the Dow Jones index erasing all its gains this year and the S&P 500 remaining on a downtrend for the third straight week. Investors remained cautious of higher inflation numbers and a strengthening economy giving the US Federal Reserve more room for further policy tightening.

Traders are now expecting the Fed to hike its benchmark interest rate by 50 basis points in March after data released last week showed the PCE (Personal Consumption Expenditures) price index rising 5.4% in January. The PCE is the Fed’s preferred gauge of inflation.

Data released on Monday showed pending home sales in the US growing by 8.1% in January, beating market expectations of a 1% rise.

Growth stocks recovered on Monday, with Tesla gaining around 5.5% after the electric vehicle maker said it had doubled Model Y production at its Giga Berlin-Brandenburg plant in Germany. Shares of Seagen also jumped more than 10%, after the Wall Street Journal said Pfizer was in early talks to acquire the company.

However, markets gave up some gains later during the session, following a decline in utilities and healthcare stocks.

The yield on 2-year Treasury notes also fell, after surging to around a four-month high.

The Dow Jones index gained 72.17 points, or 0.22%, to close at 32,889.09 on Monday, while the S&P 500 added 0.31% to reach 3,982.24 and the Nasdaq 100 jumped 0.74% to settle at 12,057.79.

What to watch: Investors await economic reports on wholesale inventories, home price index and Chicago PMI from the US today. Wholesale inventories in the US, which rose by 0.1% to $932.9 billion in December, is expected to come in unchanged in January. The S&P/Case-Shiller Home Price Index is expected to decline 0.7% in December, following a 0.8% contraction in November. Analysts expect the Chicago PMI to improve to 46 in February, from 44.3 points in the previous month.

The markets today

The Canadian dollar will be in focus today ahead of the GDP report

Context: The CAD/USD forex pair moved higher on Monday, after recording losses in the previous session.

Details: The loonie fell to a seven-week low of 1.3665 on Friday, amid a decline in global stocks last week.

Global stocks recovered from a one-month low and the US dollar pared some gains as data released last week increased prospects of higher rates in the US and Europe.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.5% to 104.67 on Monday.

Data released on Monday showed Canada’s current account deficit widening to C$10.64 billion in the fourth quarter, compared to a C$8.42 billion gap in the previous quarter.

The decline in crude oil, one of Canada’s major exports, limited overall gains for the loonie. WTI crude oil for April delivery fell 64 cents to settle at $75.68 per barrel.

The CAD/USD forex pair added over 0.2% to settle at 1.3576 on Monday. The S&P/TSX Composite index gained 0.20% to close at 20,260.13, cutting back losses recorded last week.

What are expectations: Traders await GDP data from Canada today. The Canadian economy, which grew by an annualised 2.9% in the third quarter, is expected to expand by just 0.9% in the fourth quarter.

Other Markets: European indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.72%, 1.13%, 1.51% and 1.07%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0588 and 1.0598 Negative
AUD/USD – 0.6742 and 0.6752 Positive
Copper – 4.0027 and 4.0152 Positive
Dow Jones  – 32838.26 and 32916.40 Positive
Nikkei 225 – 27521.84 and 27540.84 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0596, -0.14%) Dow ($32,956, 0.14%) Brent ($82.18, 0.2%)
GBP/USD (1.2056, -0.07%) S&P500 ($3,995, 0.18%) WTI ($75.89, 0.3%)
USD/JPY (136.29, 0.06%) Nasdaq ($12,121, 0.31%) Gold ($1,826, 0.1%)

What else to watch today

South Africa’s money supply M3, private sector credit, balance of trade, number of unemployed persons and unemployment rate, Germany’s import prices, Turkey’s GDP growth rate, France’s inflation rate, GDP growth rate, household spending and producer prices, Spain’s consumer price inflation rate and current account, Italy’s industry sales, India’s central government budget value, infrastructure output and GDP growth rate, Brazil’s unemployment rate, government budget value, gross debt to GDP and net payrolls, US goods trade balance, Redbook index, FHFA house price index, Richmond Fed manufacturing index, Richmond Fed services index, Dallas Fed services revenue index and CB consumer confidence, Russia’s money supply M2, Australia’s house prices, as well as Saudi Arabia’s money supply M3 and value of loans.

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