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Big Tech losses extend as Gold, Bitcoin make more record highs

Vantage Updated Updated Wed, 2024 March 6 01:25

Headlines

* Bitcoin retreats after record-setting run that topped $69,000

* US Services sector cools, while job concerns are mounting  

* BoC policymakers to weigh change of tone at March meeting

* UK Chancellor Hunt expected to cut National Insurance by 2% in Budget

FX: USD moved lower below its 200-day SMA sits at 103.73. The ISM services data came in below expectations at 52.6 versus 53.0. Prices paid also fell below estimates. The spike low from a few weeks ago is 103.43. Today’s focus will be on Powell’s semi-annual testimony to Congress.

EUR enjoyed a third straight day of gains. Prices have hit a major Fib retracement level at 1.0875. Final February composite and services PMIs were revised mildly higher. The latter was first print above 50 since July last year.

GBP outperformed its major peers on media speculation of a cut in National Insurance at today’s Budget. We look at this in more detail below. Dollar weakness after US data also played a part in the bid in cable.

USD/JPY stayed in its range even after the sell-off from the soft US ISM Services. Adding to mild yen strength was Tokyo CPI. It pointed to inflation potentially picking up again. Spring wage negotiations are the big risk event and due to be published on March 15. Reports suggest the Shunto will come in on the strong side, perhaps even above 4% y/y.

Both AUD and NZD underperformed again on muted risk sentiment. Aussie GDP is forecast to come in at 0.2%, matching the prior print. USD/CAD challenged 1.36 again before paring gains and remains stuck in its range ahead of today’s Bank of Canada meeting.

Stocks: US equities sunk with losses in Big Tech dragging the indices lower. The broad-based benchmark S&P 500 closed 1.02% lower at 5,078. The tech-heavy Nasdaq 100 lost 1.80% to finish at 17,897. The Dow Jones settled 1.04% down at 38,585. The equal-weighted S&P 500 held up much better than the market-cap weighted index. Target was a standout outperformer after its strong earnings report. But losses were again notable in Tesla and Apple. A fire in its German production plant hurt the EV-maker. Strong long-term support sits around $177.25. Apple continues to decline, on reports that iPhone sales tanked in China. The stock price dipped below a previous swing low at $171.96. The October bottom at $165.67 is a key level.

Asian futures are pointing lower. APAC stocks traded mixed on Tuesday as markets digested the Two Sessions announcement. Economic growth targets for 2024 were in line with expectations with signals for moderately increased stimulus. The budget deficit target was a mild let down at 3%. The 5% GDP goal will be more challenging to repeat due to less favourable base effects. The Hang Seng underperformed with a miss on the Caixin Services PMI not helping risk appetite.

Gold surged for a third day in a row and got close to the record intraday high, made at the start of December at $2,148. That’s five straight days of gains, with the top at $2,141. Prices are overbought on several measures.

Day Ahead – UK Budget, Fed’s Powell Testimony

The UK Chancellor delivers a Spring Budget later today ahead of a general election due to take place at some point this year. After the ruling party garnered their lowest ever vote in a recent poll, PM Sunak may well leave the election day as late as possible. That means we could get another budget in the Autumn with more sweeteners than any giveaways today (rumoured 2p cut in national insurance). Chancellor Hunt doesn’t have a great deal of “headroom” in his finances but has consistently said any tax cuts must be affordable and responsible. Markets won’t look favourably upon him veering from this after the Truss debacle.

Fed Chair Powell is likely to reiterate that the FOMC is in wait-and-see mode and in no rush to cut rates. Officials want to have maximum confidence that inflation is on a sustainable path to the 2% target. Interestingly, one rate cut and then a pause as opposed to a typical series of consecutive cuts was mentioned by Atlanta Fed’s Bostic on Monday. There’s now roughly a 70% chance of the first cut coming in mid-June.

Chart of the Day – USD/CAD awaits BoC tone

The Bank of Canada will leave rates unchanged at 5% at today’s meeting. Inflation fell back into the bank’s 1-3% target range (2.9% last) but policymakers are expected to want more time to be convinced that price pressures have been tamed. A rebound in the housing market is a risk and shelter costs remain elevated. The first rate cut is seen in June so any hints around this will move the CAD.

The USD’s mild drop last Friday formed the third leg of a bearish “evening star” pattern on the daily USD/CAD chart. But this has yet to play out with prices supported by the 50% level of the Q4 sell-off at 1.3538. Solid resistance sits at 1.36, though a break above here could develop quite quickly after recent consolidation.