Daily Game Plan

by Contributor
on February 28, 2024

 

TODAY’S GAME PLAN:  from
the trading desk, this is not research

DATA/HEADLINES:  8:30ET GDP, Core PCE Price Index, Advance Goods Trade Balance,
Retail and Wholesale Inventories; 12:00ET Fed’s Bostic speaks; 12:15ET Fed’s Collins speaks; 12:45ET Fed’s Williams speaks

TODAY’S HIGHLIGHTS and News:  

  • Biden and Trump edged closer to a 2024 rematch, with both cruising to victory in the Michigan primaries
  • Wildfires in Texas are threatening oil refining and cattle ranches

World stocks eased overnight as traders positioned ahead of a key US inflation reading tomorrow that may influence the timing of the Federal Reserve’s easing cycle.
David Solomon, the chief executive of Goldman Sachs said that softer consumer spending calls into question the view that the US economy will see a soft landing.
Interest rate markets remained relatively stable, with Treasury yields showing a slight decline following a busy week of new debt offerings. Meanwhile, Bitcoin advanced for a fifth
day, on track for its biggest monthly increase since October 2021.

 

EQUITIES: 
 

US equity futures are lower, with investor focus squarely on the US personal consumption expenditures price index for January, the Fed’s preferred inflation measure,
due on Thursday. The index is expected to have risen 0.3% on a monthly basis in January, up slightly from the 0.2% increase seen in December. In pre-market trading, Apple shares were slightly lower, in line with some weakness in other tech stocks and with
the group said to be set to scrap its decade-long effort to build an electric car. Apple is said to have made that disclosure internally this week to the 2,000 employees who had been working on the project. Ambarella (AMBA US) surged 11% as the company’s first-quarter
revenue projection exceeded the midpoint of analysts’ expectations. Applied Materials saw a 2.8% decline in shares after US government agencies raised concerns about the company’s shipments to Chinese customers. Beyond Meat was trading +57% higher in premarket
following strong fourth-quarter net revenue and an optimistic margin forecast for the year. eBay shares rose 4.8% after reporting better-than-expected fourth-quarter results, leading to analyst upgrades. Meanwhile, cryptocurrency-linked stocks gained as Bitcoin
advanced for a fifth day, on track for its biggest monthly increase since October 2021. Earnings today include Salesforce, HP, Snowflake, Paramount, RBC, TJX.

US 4Q GDP PRICE INDEX RISES AT A 1.6% ANNUAL RATE; EST. 1.5%. *US 4Q PERSONAL CONSUMPTION RISES AT 3.0% ANNUAL RATE, *US 4Q CORE PCE PRICE INDEX RISES AT A 2.1% ANNUAL
RATE

Futures ahead of the bell: E-Mini S&P -0.2%, Nasdaq -0.3%, Russell 2000 -0.5%, DJI -0.2%  

 

 

 

 

European gauges dipped in quiet trading. The Stoxx 600 index edged lower as investors digested the latest earnings. Personal care stocks are the worst performers,
led lower by Reckitt Benckiser, whose sales missed expectations.
St James’s Place dropped the most in seven years after slashing its dividend.  Dutch chip gear firm ASM International slipped as it projected revenue for this quarter that fell
far below market expectations. Stoxx 600 -0.3%, DAX +0.12%, CAC -0.14%, FTSE 100 -0.7%.

Asian stocks saw their worst day in a month, dragged lower by a late selloff in Chinese stocks as regulators moved to shrink the size of a popular quantitative trading
strategy. The MSCI Asia Pacific Index declined 0.7%, with financial and consumer discretionary stocks the biggest drags. Chinese shares in Hong Kong and the mainland retreated after Bloomberg reported that some quantitative funds that manage money for external
clients were told to stop accepting new inflows and phase out “Direct Market Access” products. Worries over the property sector lingered after a liquidation petition was filed against developer Country Garden. Hong Kong’s Hang Seng Index dropped on disappointment
with the city’s annual budget. Taiwan’s market was closed for a holiday. Shanghai Composite -1.9%, Hang Seng Index -1.5%, CSI 300 -1.3%, Sensex -1.1%, Thailand -0.8%, Singapore -0.6%, ASX 200 -0.03%. Vietnam +1.4%, Kospi +1%.

FIXED INCOME: 
 

Federal Reserve Governor Michelle Bowman signaled on Tuesday that she was in no rush to cut US interest rates, particularly given continuing inflation risks. Bond
traders no longer expect the Fed to lower interest rates by more than 75 basis points this year. Swap markets show traders see about a 50% chance of a June rate cut, and little likelihood of any before then. US 10-year yields around 4.29% are ~2bp richer on
the day with bunds slightly outperforming and gilts lagging by less than 1bp in the sector; Tuesday’s notable curve-steepening move remains intact with 2s10s and 5s30s trading near top of yesterday’s range.

METALS: 
 

  

Gold steadied before the release of US inflation data that may provide clues on when the Federal Reserve will pivot to monetary easing. Expectations
are for the core PCE price index to have grown by 0.4% on a month-on-month basis in January against a 0.2% increase in December.  Spot gold -0.04%, silver -0.5%.  

 

 

ENERGY:  

 

Oil prices pulled back as the prospect of delays to US interest rate cuts, a rise in US crude stocks and continuing hopes of Gaza ceasefire deal in the coming days.
US crude stocks showed an 8.4 million barrel build last week, according to API. That would take total holdings to more than 450 million for the first time in seven months if confirmed by the EIA. Wildfires in Texas are threatening oil refining and prompted
the evacuation of a main US nuclear weapon assembly plant.
Elsewhere,
China’s oil demand entered a “low-growth phase,” CNPC said, as it forecast consumption will rise by only 1% this year. WTI -1.1%, Brent -0.9%, US Nat Gas +1.4%, RBOB -1.1%

 

 

CURRENCIES:   

In currency markets, the dollar headed for its best day in two weeks, up against all G-10 peers ahead of US data that includes GDP and core PCE price index. Month-end flows from US corporates
are expected to weigh on today’s bullish momentum.  The New Zealand dollar slid over 1% along with government bond yields after the Reserve Bank of New Zealand delivered less hawkish comments on inflation, citing how most measures of price expectations have
fallen. The central bank left rates unchanged at 5.5% which prompted a rally of 16bps in NZ 2yr yields. US$ Index +0.2%, GBPUSD -0.3%, EURUSD -0.3%, USDJPY -0.1%, AUDUSD -0.7%, NZDUSD -1.2%

 

Bitcoin +5.4%, Ethereum +2.4%. Bitcoin advanced for a fifth day, on track for its biggest monthly increased since October 2021. Bitcoin climbed
above $59,000, up 39% in the month.

TECHNICAL LEVELS:  

ESH24

10 Year Yield

April Gold

April WTI

Spot $ Index

Resistance

5200.00

 

2152.3

85.90

110.000

 

5162.00

5.000%

2118.0

84.60

109.120

 

5141.00

4.700%

2100.0

83.30

107.350

 

5125.00

4.550%

2089.5

82.05

105.900

 

5108.00

4.365%

2061.0

79.65*

104.830

Settlement

5090.00

2044.1

78.87

 

5061.00

4.145%

2024.0

75.52

103.720

 

5042.00

4.000%

1980.6

74.43

103.145

 

5022/25

3.640%

1949.1*

73.50

102.280

 

5002.00

3.245%

1935.6

71.49

101.550

Support

4965.00

3.000%

1928.0

70.00

100.615

Colors within the report:
Green is always the 200 period (day, week).
Red is always 21,
Blue = 50,
Brown =
100 *Stars have added importance 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

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