Marketmind: Yen pops on Leap Day as PCE inflation looms
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[February 29, 2024] A
look at the day ahead in U.S. and global markets from Mike Dolan
February's extra 'leap year' day saw the yen jump to two-week highs on
hawkish Bank of Japan noises and bitcoin surge again to within 10% of
new records - but the big hurdle for U.S. markets is the critical PCE
inflation readout later today.
The yen rose to its best levels since mid-February and the Nikkei ended
in the red again after BOJ board member Hajime Takata said the central
bank must consider overhauling its ultra-loose policy, including an exit
from negative interest rates and bond yield caps.
Vice finance minister Masato Kanda also told G20 counterparts meeting in
Brazil that Japan would act to prevent excessive weakness of the yen.
Bitcoin, meantime, headed for its biggest monthly gain in more than
three years - briefly topping $63,000 overnight - as money fills
newly-listed bitcoin funds and traders speculated ahead of April's
'halving' event.
But the cat-and-mouse game over the timing of BOJ 'normalization' comes
in tandem with second-guessing over the timing of the first rate cuts
from the Federal Reserve and European Central Bank.
Thursday's release of Fed's favored PCE measure of inflation for January
remains pivotal to its decision making.
Although the Fed will see February consumer price updates before it
meets again next month, today's release is the last PCE readout before
the March 20 gathering.
Headline PCE inflation is expected to have fallen again to just 2.4%
versus 2.6% - with 'core' rates down to 2.8% and both measures clocking
their lowest in almost 3 years. But an expected uptick in monthly price
rises may keep Fedsters wary.
![](http://archives.lincolndailynews.com/2017/Jul/22/images/ads/current/rohlfs_lda_072017.png)
While a relentless message of 'patience' from Fed officials over recent
weeks has pushed futures markets into only fully pricing a first cut by
July, the latest stream of speeches seem keen not to take eventual
easing completely off the table.
New York Fed boss John Williams said on Wednesday that even though
there's some distance to cover in achieving the 2% inflation target, the
door is opening to rate cuts this year.
Subdued Wall St stocks ended in the red on Wednesday and futures were
down again ahead of Thursday's bell.
And there was no 'leap day' for cloud data firm Snowflake, whose shares
plunged 22% overnight after an earnings miss, warning on consumer demand
ahead and the appointment of a new chief executive.
U.S. Treasury yields ticked higher into the PCE release and as
Democratic and Republican leaders in Congress announced a deal for
advancing the 12 annual bills that fund an array of federal programs and
which could avert government shutdowns as soon as Saturday.
With dollar/yen leading the way, the dollar index fell back.
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![](../images/022924PIX/busine74.jpg)
Examples of Japanese yen banknotes are displayed at a factory of the
National Printing Bureau producing Bank of Japan notes at a media
event about a new series of banknotes scheduled to be introduced in
2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File
Photo
![](http://archives.lincolndailynews.com/2023/Nov/22/images/ads/current/llm_lda_BASKETBALL_2023.png)
November's election is never far from investors' minds at this stage
of the year.
The U.S. Supreme Court on Wednesday agreed to decide Donald Trump's
claim of immunity from prosecution for trying to overturn his 2020
election loss, giving him a boost as he tries to delay criminal
prosecutions while running to regain the presidency.
The Supreme Court set the case for oral argument during the week of
April 22.
Elsewhere, mainland Chinese shares jumped more than 1% as regulators
said they would strengthen supervision of derivatives and announced
punishment for a hedge fund for excessive, high-frequency trading in
share index futures.
With northbound inflows to stocks catching the eye, there's also
some tempering on the negativity as investors await the outcome of
next week National People's Congress for a series of economic
targets and policy priorities for this year.
In Europe, data showed inflation fell in six economically important
German states in February - encouraging hopes that German inflation
is continuing on its downward trajectory. Spanish and French
inflation slowed too, albeit by less than forecast in the latter.
Traders were also parsing signals from ECB officials about changes
to how it manages short-term interest rate management as it runs
down its bloated balance sheet.
Shares in London-listed hedge fund firm Man Group rallied 3.6% to
their highest since mid-March 2023 after it reported assets under
management rose to a record $167.5 billion last year.
Key diary items that may provide direction to U.S. markets later on
Thursday:
* U.S. Jan personal income & consumption, PCE inflation reading,
Dallas Fed core PCE cuts, weekly jobless claims, Feb Chicago PMI
business survey, Jan pending home sales; Canada Q4 GDP update
* New York Federal Reserve President John Williams, Atlanta Fed
President Raphael Bostic, Cleveland Fed chief Loretta Mester,
Chicago Fed chief Austan Goolsbee Bank of England
* U.S. Treasury auctions 4-week bills
* G20 finance ministers and central bankers meeting in Sao Paulo, G7
meets on sidelines
* U.S. corp earnings: Best Buy, Hewlett Packard, Hormel Foods,
Autodesk, Evergy, NetApp, Zscaler, NetEase, Cooper, Celcius, Bath &
Body Works, etc
(By Mike Dolan, editing by Christina Fincher, mike.dolan@thomsonreuters.com)
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