EQUITIES: Bounce in Stocks Allows Oversold Condition to Unwind
A short-term reversal higher in S&P E-Minis last week highlights the start of a corrective cycle. The trend condition has been oversold following recent weakness and the move higher is allowing this set-up to unwind. Eurostoxx 50 futures continue to trade above their recent lows. The latest bounce highlights the start of a corrective cycle and if this is correct, marks an unwinding of the recent oversold trend condition.
- Japan's NIKKEI closed higher by 285.18 pts or +0.84% at 34267.54 and the TOPIX ended 24.84 pts higher or +1% at 2513.35.
- Elsewhere, in China the SHANGHAI closed higher by 4.854 pts or +0.15% at 3267.662 and the HANG SENG ended 48.87 pts higher or +0.23% at 21466.27.
- Across Europe, Germany's DAX trades higher by 309.15 pts or +1.48% at 21264.04, FTSE 100 higher by 79.62 pts or +0.98% at 8213.99, CAC 40 up 35.65 pts or +0.49% at 7308.77 and Euro Stoxx 50 up 48.42 pts or +0.99% at 4959.81.
- Dow Jones mini up 27 pts or +0.07% at 40769, S&P 500 mini up 4 pts or +0.07% at 5444.5, NASDAQ mini up 42.75 pts or +0.23% at 18977.25.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
