FinancialMarkets 9 Things You Need To Know
Good Day, Beijing steps up stock market support, and US bonds drop as investors adjust rate cut forecasts. Here’s what people are talking about.
China Stock Rebound
Chinese equities rallied as Beijing stepped up its efforts to stem a rout with a string of policy
announcements including a state fund’s vow to boost stock purchases. President Xi Jinping is also set to
receive a briefing from Chinese regulators on financial markets, according to people with knowledge of
the matter, underscoring an urgency in Beijing to prop up the country’s plunging stocks.
China is tightening trading restrictions on domestic institutional investors as well as some offshore units
as authorities fight to stem the rout in stocks. Officials imposed caps on some brokerages’ cross-border
total return swaps with clients, limiting a channel that can be used by China-based investors to short
Hong Kong stocks. At the same time, some Chinese brokers that use the channel to buy mainland shares
for their offshore units were told not to reduce their positions. Meanwhile, investors keep yanking cash
from US-listed ETFs tracking Chinese stocks.
Bond Market Jitters
Treasuries steadied in Asian trading after two sessions of heavy selling. The 10-year yield jumped by
around 27 basis points over Friday and Monday, its biggest two-day rise since June 2022. The selling
pressure reflects shifting attitudes toward the prospect of imminent Federal Reserve interest rate cuts
following strong economic data and comments from central bankers.
Treasuries saw their biggest two-day loss in months as strong US economic data reinforced the message
of Federal Reserve officials that interest-rate cuts are unlikely to begin before May. US 10-year yields
climbed 14 basis points to 4.16% and those on 2-year notes approached 4.5%. The Atlanta
Fed’s Raphael Bostic said the central bank’s long-term estimate for the US unemployment rate has fallen
significantly in light of evidence of a tighter labor market in recent years, while Chicago Fed boss Austan
Goolsbee reiterated he’d like to see more favorable inflation data, although he refrained from explicitly
ruling out a potential rate cut in March.
UK Interest Rates
Bank of England Chief Economist Huw Pill said interest rates could drop this year as a “reward” to the
economy for bringing inflation down. Pill said borrowing costs are on track to fall so long as inflation
declines as expected — and that the Consumer Prices Index doesn’t need to drop all the way to the 2%
target before the cuts can begin. Monetary policy is now “on a different path than we were over the
course of last year,” he said.
Oil Market Yesterday
Brent crude inched up in early Tuesday trade as investors waited to see whether a Middle East trip by
top U.S. diplomat Antony Blinken will bring a halt to
the Gaza war, which has raised concerns about supplies from the major producing region.
On the supply side, market participants are awaiting
industry data due later on Tuesday on U.S. crude
stockpiles. Five analysts polled by Reuters estimated
on average that crude inventories rose by about 2.1
million barrels in the week to Feb. 2.
Top oil exporter Saudi Arabia unexpectedly kept
March price of its flagship Arab Light crude to Asia
unchanged at a more than two-year low, an Aramco
statement showed on Tuesday, as the OPEC leader
strives to maintain its market share.
Analysts remained mixed over the impact of the ongoing disruptions on crude oil prices, with several
noting that the current disruptions affect supply
routes rather than the broad supply dynamics which
have been heavily influenced by OPEC production
policy.
Russia-backed Indian refiner Nayara Energy has imported a crude cargo of Sokol grade that will reach
its oil facility at the Western coast this week, a company source said on Tuesday.
MACRO Economics
The U.S. dollar was steady near a three-month peak
on Tuesday on rising expectations the Federal Reserve is unlikely to cut rates aggressively this year,
while the Australian dollar gained after the central
bank said it could not rule out another rate hike.
U.S. Treasury yields rose on Monday, with interest
rate sensitive two-year yields reaching a one-month
high, after Federal Reserve Chairman Jerome Powell
continued to push back against the prospect of near
-term rate cuts.
Gold prices lingered near their lowest level in almost
two weeks on Tuesday, pressured by a firmer dollar
and elevated Treasury yields, as traders lowered
expectations of aggressive interest rate cuts by the
U.S. Federal Reserve this year.
U.S. S&P Global January final composite PMI at 52.0
(vs flash 52.3) and U.S. S&P Global January final services PMI at 52.5 (vs flash 52.9).
ISM report on U.S. non-manufacturing sector shows
PMI 53.4 in January vs. consensus 52.0 and vs 50.5
in December; ISM non-manufacturing business activity index 55.8 in January vs 55.8 in December;
prices paid index 64.0 in January vs 57.4 in December; new orders index 55.0 in January vs 52.8 in December and ISM non-manufacturing employment
index 50.5 in January vs 43.8 in December.
Key Market Data
Today / Tomorrow
All times are Eastern Time (EST). We focus on U.S economic data mainly, as the U.S data drives
the markets mostly. Sometimes we look at Key China data as well as European Union data.
Tuesday
EIA Short Term Energy Outlook
12.00
API Weekly Crude Stocks
16.30
Wednesday
Crude Oil Inventories
10.30
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Market Summary
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