Feb 16 2024:A comprehensive look at the upcoming day in global and European markets by Rae Wee
Japan’s Nikkei index appeared to be channeling its glory days of the late 1980s as it neared a record high during Friday’s early Asian session.
The Nikkei surged to a 34-year pinnacle at 38,865.06 points, inching tantalizingly close to its all-time peak of 38,957.44 points achieved on December 29, 1989. This surge continues the index’s remarkable 15% climb for the year, extending the impressive 28% rally witnessed in 2023.
This bullish momentum persists even amidst Japan’s economic downturn, slipping into recession and conceding its position as the world’s third-largest economy to Germany. Additionally, the weakening yen has reentered traders’ considerations.
Traditionally, a depreciating yen tends to benefit the stock market, bolstering the profits of large Japanese corporations with global operations, thereby supporting the export-driven economy. However, the flip side of a weaker yen is the inflationary pressure it exerts, particularly on food and energy imports, adversely affecting consumers grappling with stagnant wages.
This presents a conundrum for the Bank of Japan (BOJ), which is navigating the delicate balance between phasing out years of negative interest rates and maintaining accommodative monetary policies.
BOJ Governor Kazuo Ueda stated on Friday that the central bank would assess whether to sustain its various monetary easing measures as the achievement of its inflation target comes into sight.
Meanwhile, in the United States, a flurry of data awaits release, including January’s producer price index (PPI) and the University of Michigan’s consumer sentiment survey.
A higher-than-expected PPI could signal upward pressure on the personal consumption expenditures (PCE) price index, a scenario that may unsettle markets, particularly Wall Street.
Similarly to the Nikkei, U.S. equities have been on a remarkable ascent this year, reaching record highs, buoyed by expectations of future rate cuts by the Federal Reserve.
Fueled by the ongoing tech and artificial intelligence boom, coupled with robust recent earnings, the S&P 500 has recorded gains in 14 out of the last 15 weeks, a feat last achieved in 1972.
With the index maintaining a relatively flat trajectory for the week, it stands on the brink of clinching a 15th winning week out of the last 16, a milestone achieved only seven times in its history, with the last instance also occurring in 1972.
