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Stock markets struggle to find direction ahead of inflation data

US stocks moved little on Tuesday, following a similarly slow session in Europe. On Wednesday, Asian stocks were likewise mixed and struggling to find a clear direction. Macroeconomic data released on Tuesday wasn’t enough to send equities in either direction, but suggested both the US consumer and industry may be slowing down in the coming months. The next major impulse for markets comes late in the week when the US and Europe release inflation data on Thursday and Friday.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
Mixed markets
© Shutterstock

In New York, traders remained cautious ahead of Thursday’s Personal Consumption Expenditures (PCE), when they hope to find clues into when the Federal Reserve (Fed) could begin cutting interest rates. Stock indices hovered near all-time highs. The Dow Jones Industrial lost 0.3% while the S&P 500 gained 0.2%. The Nasdaq-100 likewise finished Tuesday’s session 0.2% higher.

In the Asia-Pacific region, stock markets were also mixed on Wednesday. Hong Kong’s Hang Seng Index fell 1.4%, despite efforts from the local government to prop up the real estate market midweek. In mainland China, the Shanghai Composite was trading 0.8% lower. In Australia, the S&P/ASX 200 finished Wednesday’s session roughly flat after the country posted unchanged inflation in January. The Consumer Price Index (CPI) increased 3.4% in January, when compared to the same month a year earlier, the same pace as in December. The Reserve Bank of New Zealand kept its cash rate at 5.5%, a 15-year high, noting inflation at 4.7% is still beyond the central bank’s target. New Zealand’s S&P/NZX 50 closed 0.6% higher. In Tokyo, the Nikkei 225 fell 0.3% and South Korea’s Kospi gained 1.1%.

Macroeconomic data released Tuesday out of the US and Europe wasn’t strong enough to sway markets either way. Consumer confidence in the US decreased in February after three months of gains in a row. The Conference Board Consumer Confidence Index fell to 106.7 points from 110.9 in January. The weaker consumer sentiment could embolden the Fed to make its first interest rate move, but the central bank is seeking to lower inflation towards its 2% target before it begins cutting interest rates. Higher consumer confidence in combination with recent, strong labour market data increases consumer spending, which drives more inflation. As part of the Conference Board’s survey, consumers said they expect inflation over the next year to continue to fall and inflation expectations are at their lowest since the pandemic year 2020.

US durable goods orders fell by 6.1%, driven by lower plane orders after a near-accident involving a Boeing aircraft. When excluding transportation equipment, orders fell just 0.3%. The contraction in order volumes signals firms are unsure about their economic future and scaling back on investment, which could be a sign of difficult times for the US industrial sector in the coming months.

Consumer confidence in Germany stabilized after a setback last month, according to the GfK Consumer Climate report. Consumer confidence came in at -29 points for March, up from -29.6 in February. That month was a large drop from -25.4 points in January. Income expectations rose, according to GfK, but economic expectations and willingness to buy barely showed signs of improvement. The German economy has been stuck in a deep slump with gross domestic product (GDP) contracting by 0.1% for the full year 2023. Some economists have suggested Germany is likely in a recession in the current quarter - its second recession in six quarters - after contracting by 0.3% in the fourth quarter. The Euro Stoxx 50 gained 0.5% and the DAX was up 0.8% on Tuesday.

Corporate news in focus: Quarterly figures from Holcim, HP, Reckitt Benckiser, Salesforce.

Economic data in focus: Swiss ZEW Indicator of Economic Sentiment, euro area business and consumer survey, US gross domestic product.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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