AIMSTAR FINANCIAL INSIGHTS – April 1, 2024

Your Weekly Guide to Financial Insights and Market Trends

Vikki Zhao and Olena Li

PUBLISHED Mon, April 1, 2024, 11:30 AM EST. 6 min read.

2024 April 1st , S&P 500 futures have increased by 14 points, marking a 0.3% rise above the fair value. NASDAQ 100 futures have climbed by 62 points, achieving a 0.4% gain above fair value, and Dow Jones Industrial Average futures are up by 99 points, also trading 0.3% higher than fair value. Despite the closure of bond and equity markets for Good Friday, the release of the February Personal Income and Spending report went ahead, offering insights into inflation through the PCE Price Indexes, a preferred measure by the Fed.

In February, personal income saw a 0.3% rise from the previous month, slightly below the anticipated 0.4%. Personal spending surged by 0.8%, exceeding expectations of a 0.5% increase. The PCE Price Index experienced a 0.3% month-over-month increase, slightly under the forecasted 0.4%, after January’s 0.4% rise. Excluding food and energy, the core PCE Price Index went up by 0.3%, aligning with expectations, following a 0.5% rise in January.

Year-over-year figures show the PCE Price Index advanced by 2.5%, a slight increase from January’s 2.4%, while the core PCE Price Index, rose to 2.8% from 2.9%. The report highlights the persistent inflation levels, with a notable observation that consumer spending has significantly surpassed income growth. This is evidenced by the decline in the personal savings rate to 3.6% from 4.1%, suggesting that the rise in spending is being fueled by consumers dipping into their savings.

As for Treasury yields, they have remained largely stable since Thursday, with a slight decrease in the 2-year note yield by one basis point to 4.61%, and a minor increase in the 10-year note yield by two basis points to 4.22%.

U.S. stock futures saw an uptick and gold reached a new peak, hitting its highest price ever, following last week’s reports of decelerating inflation, fuelling expectations that the Federal Reserve might reduce interest rates within the year. A decrease in the rate of core inflation last month— the Fed’s favored measure for assessing inflation without the fluctuating costs of food and energy—along with an increase in consumer spending, suggests the optimistic outlook that has driven stock market records this year is still valid. The core personal consumption expenditures (PCE) price index, excluding food and energy, increased by 0.3% from the previous month, marking a slowdown from January’s unexpectedly high figure.

The central bank is not in a hurry to lower interest rates, waiting for further proof of inflation being under control.

———— Federal Reserve Chair Jerome Powell

With almost 86% of S&P 500 companies trading above their 200-day moving average (DMA), strong performances are observed in the Energy, Industrials, Financials, and Materials sectors, indicating widespread momentum in the market surge. The 21-day moving average (DMA), currently at 5167, is eyed for initial support, with the 50DMA at 5047 as the next level if declines occur. On the upside, should prices advance, the levels to watch are 5318 and then 5462, which represent upcoming Fibonacci projections.

Good News:

Good news for shareholders of China Automotive Systems: CAAS shares (CAAS.US) surged 10% in pre-market trading, with a staggering 153.5% increase in Q4 net profit and record annual net sales.

Good news for Novocure shareholders: Novocure’s stock (NVCR.US) price soared as its “tumor-treating fields” phase 3 trial achieved its primary endpoint.

Good news for Jiayin Technology shareholders: Jiayin Technology (JFIN.US) released its 2023 financial report, with a total transaction volume of approximately 88.1 billion yuan for the full year 2023, representing a year-on-year increase of 58.7%.

Good news for 36Kr shareholders: 36Kr’s (KRKR.US) total revenue for the fiscal year 2023 increased by 5.5% year-on-year to 340 million yuan, driven by AGI empowerment for cost reduction and efficiency improvement as well as multiple scenario applications.

Good news for shareholders of Trump Media & Technology: Trump Media & Technology (DJT.US) surged over 24% in pre-market trading. Starting from Tuesday (March 26th), trading commenced on the Nasdaq under the ticker symbol “DJT,” representing the initials of former US President Trump. As a result, DWAC stock price surged overnight by 35.22% to $49.95, marking the largest single-day increase since January.


Bad News:

Bad news for Toyota shareholders: Global sales for Toyota Motor (TM.US) declined by 7% year-on-year in February, dragged down by a scandal in Japan.

Bad news for cryptocurrency enthusiasts: The cryptocurrency market faced another setback as a US judge allowed the SEC to continue its lawsuit against Coinbase (COIN.US).

Bad news or Good news for Boeing (BA) shareholders: Boeing is experiencing significant leadership changes, with the CEO planning to resign and a restructuring of the leadership team. Since the beginning of this year, Boeing’s stock price has dropped by over 27%.

Bad news or Good news for Citigroup shareholders: Citigroup (C.US) is set to complete a historic restructuring this week, with 5,000 employees laid off so far. Last September, Fraser initiated the largest restructuring plan in the Wall Street giant’s 20-year history and is preparing for a wave of layoffs to reverse the bank’s long-standing low stock price. Since then, the bank has cut 5,000 jobs.

Canadian Economy on Path to “Soft Landing”

Deloitte Canada’s economic outlook suggests Canada could avoid a recession and return inflation to target, achieving a “soft landing.” Factors like a strong U.S. economy, cooling inflation, anticipated rate cuts, and steady immigration bolster this view. Despite challenges from high household debt and inflation, early signs of recovery emerge, with varying regional economic performances across provinces. While the outlook remains cautious, there’s optimism for economic improvement in the second half of 2024.


UK-Canada Trade Deal Fails, Tariffs on the Rise

The expiration of tariff-free provisions between the UK and Canada signals increased trade barriers, particularly impacting UK automakers facing tariffs on Canadian auto parts. Criticism mounts over UK’s failure to secure a deal with a close ally, reflecting challenges in post-Brexit trade strategy and strained negotiations.


Surge in Canadian Oil Shipments to Los Angeles

Canadian crude oil shipments to Los Angeles have increased significantly, hinting at potential changes in oil distribution along the Pacific Coast with the nearing startup of the Trans Mountain pipeline expansion. In March, Los Angeles received 1.74 million barrels from Vancouver, the highest in over four years, with Marathon Petroleum Corp., operating a local refinery, being a notable recipient. This uptick in Canadian oil imports may preview the impacts of the Trans Mountain expansion, which aims to triple its capacity to 890,000 barrels a day. The U.S. West Coast refineries could become key destinations for the pipeline’s output due to logistical advantages and tanker accessibility.


Ontario Faces Soaring Budget Deficit Amid Economic Challenges

Ontario’s Finance Minister, Peter Bethlenfalvy, unveils a challenging economic outlook as the province’s budget deficit is projected to reach $9.8 billion in the coming fiscal year, nearly double the previous forecast. Lethargic economic growth has necessitated a delay in the province’s journey towards fiscal balance, prompting the government to prioritize strategic investments over spending cuts or tax hikes. Despite minimal new affordability measures, Ontario commits to significant spending in healthcare, education, and skill development to foster long-term economic recovery.

The budget reveals Ontario’s plan to inject new funds into critical areas such as home care and community sports while facing headwinds from higher public sector salaries and infrastructure spending. However, the economic slump and increased cost of living continue to strain Ontarian households, with debt payments consuming a larger share of incomes. Critics argue the budget lacks sufficient immediate relief for everyday challenges faced by residents. As Ontario navigates through economic uncertainties, the government’s focus remains on balancing long-term investments with the need for fiscal prudence.


Decline in Active Businesses in Canada

National Bank of Canada economist Stéfane Marion reports that business closures are hitting multi-year highs, and new business openings are decelerating, leading to the first decline in active businesses in Canada, outside of the pandemic period, since 2017. The number of active businesses dropped to 929,000 in December, a decrease of 0.2% from the previous year. This trend underscores the challenges in the Canadian business environment and highlights the fragility of the economic recovery.

S&P Ratings Affirm U.S. Sovereign Rating as “AA+/A-1+”, Acknowledging Resilience of U.S. Economy

Global rating agency Standard & Poor’s confirmed last Thursday that the United States’ long-term sovereign credit rating remains “AA+”, with a short-term sovereign credit rating of “A-1+”, and maintained a “stable” outlook on the long-term rating. S&P stated, “The U.S. economy is diverse and resilient, demonstrating steady economic growth, and its monetary policy exhibits broad flexibility. The unique position of the United States as the world’s major reserve currency issuer supports its sovereign rating.” S&P anticipates that the Federal Reserve System, which provides significant monetary policy flexibility for the United States, will address challenges such as domestic inflationary pressures and vulnerabilities in financial markets. Earlier this month, rating agency Fitch also affirmed the United States’ long-term foreign currency sovereign credit rating as “AA+”, with a “stable” outlook.


Gold Price Hits Historic High

Boosted by market expectations of a Federal Reserve rate cut in June, the price of gold reached a historic high on Monday. Weak US inflation data further reinforced the anticipation of a rate cut. According to data from Investing.com, as of 18:11 Beijing time (06:11 Eastern Time), the spot price of gold rose by $19.12, approximately 0.86%, to $2,252.22 per ounce, reaching a peak of $2,265.73 during the Asian session; while gold futures rose by $34.15, about 1.53%, to $2,272.22 per ounce, having briefly touched $2,286.35 earlier.


Cocoa Prices Soar, Hitting Historic Highs

Just as Easter festivities begin, cocoa prices have skyrocketed, with one economist humorously calling it “Bitcocoa.” This week, cocoa futures reached an unprecedented high of US$10,000 per metric ton. The surge is attributed to poor harvests in the Ivory Coast and Ghana, the world’s leading cocoa producers, leading to a predicted third consecutive annual supply deficit. Ghana’s production is expected to fall to its lowest in two decades, making cocoa more than double in price since the beginning of 2024. This significant increase in a key chocolate ingredient could heighten inflation concerns, despite cocoa being a minor component in most food baskets.


Microsoft to Split Teams and Office

According to media reports, Microsoft plans to separate the sales of its chat and video application Teams from its Office products worldwide. This move aims to avoid potential antitrust fines from the European Union, as Microsoft had already separated these two products in Europe six months ago. Since Salesforce’s enterprise communication app Slack filed a complaint in 2020, the European Commission has been investigating Microsoft’s bundling of Office and Teams. A Microsoft spokesperson stated that this split is intended to meet the demands of the European Commission, providing greater flexibility for multinational companies to achieve standardized cross-border procurement.


GE Vernova Inc. (GEV.US) and Solventum Corp. (SOLV.US) to Be Added to S&P 500 Index

S&P Dow Jones Indices announced that Solventum Corp. will be added to the S&P 500 Index before the market opens on April 1 (Monday), replacing V.F. Corporation (VFC.US), which will be moved to the S&P SmallCap 600 Index before the market opens on April 3. Additionally, GE Vernova Inc. will join the S&P 500 Index before the market opens on April 2, replacing Dentsply Sirona Inc. (XRAY.US), which will be moved to the S&P MidCap 400 Index before the market opens on April 3. Solventum’s components in the S&P 500 Index and S&P 100 Index, including 3M (MMM.US), are being spun off, with the transaction expected to be completed on April 1. Following the spin-off, the parent company, 3M, will remain in both the S&P 500 Index and the S&P 100 Index.

Outlook survey

The Bank of Canada will release its latest business outlook survey and Canadian survey of consumer expectations on Monday. The report comes ahead of the central bank’s next interest rate decision and monetary policy report on April 10.

Home sales

Some of Canada’s largest cities will report their March home sales figures this week, offering a glimpse into how the spring real estate season is shaping up. The Calgary Real Estate Board is expected to report sales numbers on Monday, while the boards for the Vancouver and Toronto areas are expected to release their figures mid-week.

Grocery chat

Michael Medline, president and chief executive of Empire Co. Ltd., will take part in an event in Toronto on Tuesday morning to talk about the grocery industry. The chat comes as the federal government urges companies to sign on to a grocery code of conduct, something for which Medline was an early advocate.

Dollarama results

Dollarama Inc. will report its fourth-quarter and full-year results and hold a conference call with investors and financial analysts on Thursday morning. The results come as Canadian shoppers continue to grapple with inflation and look to stretch their budgets.

Jobs report

Statistics Canada will release its labour force survey for March on Friday. The Canadian economy added 41,000 jobs in February as the unemployment rate rose to 5.8 percent.

U.S. Non-Farm Payrolls Report

The U.S. will release the non-farm payrolls report on Friday, with expectations of a soft landing as March job additions are predicted to decrease. This report will significantly influence the Federal Reserve’s future policy direction.

The U.S. Stock Market

US stocks have surged at the start of the year, fueled by AI optimism and rate cut forecasts. The continuation of this trend into Q2 hinges on the Fed’s policy decisions, with market expectations adjusting from six to three rate cuts. Upcoming corporate earnings reports starting the second week of April will also play a crucial role in determining market direction.

Yen Weakness

As the yen continues to weaken against the dollar, breaking through its defense levels, Japan issues a warning, with officials promising action if needed to prevent excessive exchange rate volatility.

Eurozone Inflation Data

The Eurozone will announce the preliminary inflation figures for March this Wednesday, which are crucial for the market and the European Central Bank’s rate-cutting decisions, especially amid persistently high inflation.

China’s Economy

Official data on Sunday revealed that for the first time in nearly six months, China’s manufacturing activity expanded in March, with a PMI of 50.8, surpassing expectations of 50.1. This boost was largely attributed to a significant increase in new orders, reflecting improvements in both domestic and international demand, and indicating a rise in global manufacturing sentiment.

The most anticipated earnings releases for the week of April 1, 2024, are Paychex #PAYX, Dave & Buster’s #PLAY, PVH #PVH, BlackBerry #BB, Nano-X #NNOX, Canoo #GOEV, Acurity Brands #AYI, SIGMA Lithium #SGML, Conagra #CAG, and Cal-Maine Foods #CALM.

This report by The EarningsWhisper was first published on March. 27, 2024.

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