Stocks rose in Europe early despite news the UK has slipped into a technical recession. The FTSE 100 rose 0.5 per cent while in Frankfurt shares were up 0.8 per cent. The Cac went a little better and is up 0.9 per cent.
The US rallied again on Wednesday and most Asian markets were in the green. The dollar has stabilised somewhat after paring its earlier CPI-induced gains as Treasury yields gave back some ground to allow the bulls to dial up the risk. Today’s data dump includes the US retail sales, Empire State Manufacturing index, Philadelphia Fed Manufacturing index, weekly unemployment claims and industrial production figures.
The data we have already seen showed the UK slipped into a technical recession – and markets upped bets the Bank of England would cut rates sooner rather than later. The fact that inflation held steady at an almost acceptable 4 per cent gives the doves seeking to ease policy more credibility. GDP fell by 0.3 per cent in the final quarter of 2023, adding to the 0.1 per cent decline in the third. Sterling slipped against the dollar but didn’t quite nudge yesterday morning’s post-CPI lows.
Japan’s economy also tipped into a recession – at least on a technical basis. This sent government bond yields down and push out bets for the Bank of Japan to tighten monetary policy soon.
Recession, recession everywhere, ne’er any drop to think. Who cares whether the national GDP is up or down when GDP per capita is terminal – down 0.7 per cent in 2023. Too few people are shouldering too much of the burden and we keep adding to the burden. The loss of per capita income is all that matters.
The US meanwhile is facing renewed inflation pressures. However not if you are Chicago Fed president Austan Goolsbee, who says it’s obvious that “inflation is coming down”. He doesn’t support waiting until inflation hits 2 per cent to start cutting, which the market should acknowledge is a sign that the Fed won’t wait forever.
Elsewhere, the S&P 500 is up about 20 per cent in the past year, but only 5 per cent if you exclude the Magnificent Seven stocks. As long as they fight the market is fine. And when they go, the foundational leverage upon which this house of cards is built crumbles.
The whole market is hinging on Nvidia it seems, it’s the fulcrum of the entire AI bubble. And its earnings are due next week. Yesterday it rose to surpass Alphabet as the third most valuable US company.
Amazon founder Jeff Bezos sold another $2bn worth of shares in the company, taking the total to $4bn in the past week. Mark Zuckerberg has been doing similar with Meta.
The Trader is written by Neil Wilson, chief market analyst at Finalto
