More optimistic outlook from US conference board leading indicator

The US Conference board leading indicator fell by a marginally larger than expected 0.4% m/m in January, following a 0.2% m/m decline in December. The leading index fell by 3% over the 6-month period between July 2023 and January 2024, which was a smaller contraction than the 4.1% fall seen in the previous 6-month period. Although the headline figure continues to point towards there being headwinds to US growth, for the first time in two years 6 out of the 10 components rose over the prior 6-month period, suggesting a slightly more optimistic outlook.

Kuwait consumer price inflation rose 3.28% y/y in January, marginally lower than the 3.37% y/y rise recorded in December. The food and beverages component rose more sharply, increasing 4.8% y/y.

Markets will be looking ahead to tonight’s release of the FOMC minutes from the January 31 meeting, at which rates were kept on hold at an upper bound of 5.5%. The FOMC statement highlighted that the committee “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” There was further pushback from Fed Chair, Jerome Powell, at the press conference after the decision, suggesting that he doubted that officials would have that degree of confidence by March. While the minutes are broadly expected to reiterate the Fed’s hawkish stance, they will also likely be scrutinized for any signs of what committee members will need to see in order to achieve a level of confidence consistent with rate cuts.

Today’s Economic Data and Events

• 19:00 EC consumer confidence, Feb. Forecast: -15.5
• 23:00 US FOMC meeting minutes

Fixed Income

• US bond markets reopened, after being closed on Monday for President’s Day, with a risk-off sentiment dominating. The 2yr yield fell 3bps to 4.6121%, while the 10yr yield was largely unchanged at 4.2753%.
• Major European bond yields were generally lower on Tuesday. Yields on both 2yr and 10yr gilts fell 7bps to 4.5367% and 4.0393%, respectively. 10yr bund yield fell 4bps to 2.372%.
• Saudi National Bank is in the market for a USD 5yr sukuk with pricing at Treasuries +90, tighter than initial guidance of more than 120.

FX

• The dollar was weaker against a basket of major peers on Tuesday, with the spot index falling 0.2%. EURUSD gained 0.27% to 1.0808 while GBPUSD rose 0.23% to 1.2623. USDJPY pushed lower again, dropping by 0.08% to 150.01.
• AUDUSD gained 0.14% to settle at 0.6549 while NZDUSD added 0.24% to reach 0.6165. USDCAD rose 0.24% to 1.3523.

Equities

• US equity markets declined on Tuesday, with falls in chipmakers as markets wait for earnings results from Nvidia Corp. The Dow Jones fell 0.17%, the S&P 500 declined 0.6% and the NASDAQ dropped by 0.92%.
• Moves in major European equity markets were mixed on Tuesday. The Eurostoxx 50 index fell marginally, declining by 0.06%, while the DAX declined 0.14% and the FTSE 100 fell 0.12%. The CAC 40 gained 0.34%.
• Regional markets were also mixed on the day. The DFM gained 0.1% while the ADX dropped by 0.14%. The Tadawul rose 0.1%.

Commodities

• Oil prices fell on Tuesday as concerns about potential demand outweighed geo-political tensions. Brent futures were down 1.46% to USD 82.34/b, while WTI fell 1.28% to USD 78.18/b.