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US equity futures are well in the red, pointing to a down market open later this morning, as the market recalibrates rate-cut expectations. Times like this are why we developed our Market Hedge model - more on that below.
Speaking yesterday, Federal Reserve Governor Christopher Waller said the central bank should not rush to cut its benchmark interest rate until it is clear lower inflation will be sustained. That fueled an upward move in Treasury yields while the dollar jumped to a one-month high as investors curbed expectations of an interest rate cut by the Federal Reserve in March. Earlier today, European Central Bank President Christine Lagarde shared the bank could cut interest rates in the summer, not as soon as March or April expected by the market. Following Lagarde’s comments, the market expectations lopped off one rate cut this year to five quarter-point cuts.
Before the market opens, the December Retail Sales report will be published at 8:30 AM ET and it will reveal the degree to which consumers opened their wallets for the holiday shopping season. The consensus forecast is retail sales ex-autos rose 0.2% MoM, the same as in November. Given the pull forward in holiday shopping due to events like Amazon’s (AMZN) Prime Deal Days in October, the trailing three-month data contained in today’s Retail Sales report will provide far more insight. That trailing three-month data also sets the bar for companies as they report their December quarter results.
At 9 AM ET, Michael Barr, the Fed’s Vice Chair for Supervision, and Fed Governor Michelle Bowman will be making the rounds, and they are likely to reiterate a slower path to Fed rate cuts.
As tensions in the Red Sea and the risk of Israel's war in Gaza spreading in the Middle East escalate, the US is expected to redesignate the Yemeni Houthi militant group as a foreign terrorist organization. This is likely to turn up the flame of geopolitical tensions, adding to current market anxiety.
China’s economy grew by a seasonally adjusted 1.0% in 4Q 2023, matching market expectations but moderating from an upwardly revised 1.5% increase in 3Q. On a YoY basis, the Chinese economy expanded 5.2% in 4Q 2023, faster than 4.9% growth in 3Q but less than market forecasts of 5.3%. The country’s 2024 GDP growth target will be announced at an annual parliamentary meeting in early March.
China's retail sales increased by 7.4% year-on-year in December 2023, missing market consensus of 8.0% and slowing from a 10.1% jump in November. For 2023, the country’s retail sales rose 7.2% compared to 2022.
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