The Day at a Glance | March 13 2024

The Top

*Monetary Perspective: Japan may abandon negative interest rates soon.

*Industrial production in the eurozone plummeted by -6.7% YoY in January 2024, a deeper drop than anticipated by analyst consensus (-3.0%e.).

*Biden and Trump secure nominations, initiating a rematch for the U.S. presidency.

*Chinese central bank advisor calls for structural reform to stimulate growth in 2024.

*Oil rises by 2% due to attacks on Russian refineries and signs of strong demand.

*Wall Street is coming off a winning session. 

Economic environment

Monetary Perspective: Japan may abandon negative interest rates shortly. Recently, some members of the Board of Governors of the Bank of Japan (BOJ) have indicated in some forums that the bank could raise its reference rate, an event that has not occurred since 2007. What prompts this change? In the first place, inflation rebounded due to the pandemic. As wages have increased, there are expectations that a healthy spiral of prices and wages could be generated, recalling that Japan experienced decades of deflation. What is the Bank of Japan waiting for? The “Shunto” (a Japanese word meaning spring wage offensive), refers to wage negotiations between unions and employers taking place between February and March. When do markets expect interest rates to rise? Between the end of this quarter and the beginning of the next. What implications could it have? First, the Japanese Yen should appreciate and partially reverse the accumulated depreciation since 2020, nearly 45%. On the other hand, there may be a reshuffling of global portfolios, as the BOJ has a policy of controlling the 10-year Bond yield with a target of 0% and an upper fluctuation band of up to 1%, achieved through massive Bond purchases in the market. Surely, there will be changes in this management. Finally, volatility in the markets. It’s worth saying that negative interest rates began in 2016 and have been maintained for several years, so structural changes typically generate uncertainty and volatility.

Markets and companies

Global markets are mixed. The main U.S. indices closed with gains. The S&P 500 rose over 1%, along with the Nasdaq, after February inflation data from the United States which met expectations. This morning, the markets started on negative territory: Dow +0.13%, S&P -0.03%, and Nasdaq -0.65%. In Europe, markets show gains, with the Euro Stoxx up +0.57%. However, they were moving between losses and gains as they digested the latest U.S. inflation report and the UK’s gross domestic product figures. In Asia, markets recorded a contraction: Japan’s Nikkei 225 reversed gains to fall by -0.26%, closing at 38,695.97, extending its losing streak to a third consecutive day. Meanwhile, China -0.40%. In Mexico, the IPC opened lower, standing at 54,882 points (-0.03%). Oil recorded an increase in its price after industry data showed a decline in U.S. crude inventories, and Ukraine attacked Russian oil refineries again. The price is set at $79.40 per barrel (+2.4%). Natural gas is down (-2.50%). Additionally, metals are on the rise, with gold +0.40%, silver +1.10%, and copper +2.1%. Finally, cryptocurrencies are mixed. 

After yesterday’s session, the exchange rate fluctuated between a minimum of 16.75 and a maximum of 16.80, currently trading at 16.76

Corporate news

*Dollar Tree falls 7% after posting disappointing quarterly results and announcing the closure of several stores.

*Petco Health & Wellness rises 3.5% after reporting an improvement in fourth-quarter revenue.

*Tesla dropped 2% after Wells Fargo downgraded the rating from equal weight to underweight. The bank said it sees “volume risk as price cuts are having a diminishing impact.”

*Coinbase’s stocks fell over 2% in extended trading after the cryptocurrency exchange announced a $1 billion convertible notes offering.

*Nvidia’s stocks dropped over 3%. Meta and Apple stocks fell slightly.