Cela's Weekly Insights - March 10, 2024

The first full trading week of March did not disappoint. Once again, we were spoiled with new record highs in almost every direction, all amidst what initially appeared to be stronger labor market data coming out of the US. Let's dive right in.

US Unemployment Rate on the Rise

On Friday, everyone was looking at the job market to see how many jobs were added in the US during the previous month. Expectations were around 200 thousand, and the report came in at 275 thousand jobs added. More jobs added than expected is usually something to cheer about. However, in an environment where the Fed is closely monitoring inflation, this can be counterproductive. Last month's (January) figure was revised lower, from 353 to 229 thousand. Furthermore, the unemployment rate climbed notably, from 3.7% to 3.9%, now approaching its highest rate in two years. This data is crucial for determining the Fed’s trajectory on interest rates going forward.

Jerome Powell’s Testimony

Speaking of the Fed, let's quickly cover the main points of Fed Chair Jerome Powell’s testimony to Congress last week. Powell reinforced the idea that the Fed is only a few steps away from cutting interest rates. However, he did not provide a specific timeline or comment on the number of rate cuts and their magnitude. That doesn’t mean markets don’t have expectations, though. Currently, market participants are pricing in four rate cuts for this year, with the first cut of 25 basis points expected in June. As I’ve mentioned many times, especially around November of last year, do not read too much into these expectations. A flexible approach will lead to less disappointment.

ECB Signals Possible Rate Cuts in June

Now, let's turn our attention to Europe, specifically to the European Central Bank, which I have a very good view of from my office in Frankfurt. The ECB's president, Christine Lagarde, signaled at the ECB’s meeting on Thursday that rate cuts could possibly begin in June at the earliest, but more evidence is needed before taking that step. Lagarde also lowered inflation forecasts for the year from 2.7% to 2.3%. Due to the pressure the ECB is facing, especially from countries such as Italy, to lower interest rates, experts believe that the ECB is likely to lower rates before the Fed does.

Important Data in the Week Ahead

In the week ahead, more important economic data will be released, which will provide us with a better understanding of consumer buying power and, therefore, a clearer picture of inflation. This week includes the CPI inflation for February and retail sales data, both of which the Fed will be closely monitoring. Analyst expectations for yearly inflation data are at 3.11% (YoY), with a rise of 0.57% (MoM) in February. We’ll keep a close eye on this Tuesday as the data comes out.

Last Week's Market Performance: A Global Overview

Cela’s Weekly Insights Indicator

That's all for today, folks. For more insights, make sure to join me every weekday morning on my Podcast "Capital Markets Quickie." Tomorrow morning, we'll discuss the most important events in the week ahead.

Cheerio!

Endrit Cela The Investment Fella - #ECB #mm #411 🦍

Disclaimer for Cela's Weekly Insights:

Cela's Weekly Insights serves solely as an informational resource on the capital markets and reflects only my personal views, based on my independent research. It does not represent the opinions of any companies or organizations I may be associated with. Please note that this newsletter is not intended to provide financial advice. For financial decisions, I strongly recommend consulting with a professional financial advisor. The information provided here is for general informational purposes only.