Wall Street major indexes closed February in a bearish territory with a total decline of 4.19% for the Dow Jones, 2.61 for the S&P 500, and 1.11% for the Nasdaq; in contrast to the bond market, which was resting comfortably in a yield uptrend. A series of US economic data released last week revealed that manufacturing & services activities were reviving, such as: orders for manufactured goods & raw material prices = all increased; bringing the S&P Global Composite PMI (Feb.) into expansionary territory. People’s purchasing power also remains robust, as evidenced by Pending Home Sales (Jan.) soaring 8.1% MoM (vs. forecast 1%, vs. previous 1.1%). US employment data remains solid as the unemployment rate continues to fall and workers’ wages continue to rise. In response to the above reports, Fed officials sought not to sound too hawkish: Atlanta Fed President Raphael Bostic said that the 25 bps rate hike is still applicable to limit the risk of recessionary pressures on the economy; although Bank of America warned that the US benchmark rate could hover near the 6% level. On the other hand, Core Inflation (Feb.) seems to be more manageable as it fell to 3.09% YoY (lower than consensus & previous month). To stabilize Rupiah, Bank Indonesia began to implement the policy of settling Foreign Exchange Export Proceeds for a certain period in domestic banks, as well as providing attractive interest rate incentives to exporters.
This week’s outlook:
The US Nonfarm Payroll data (due Friday) will be the last important report that market participants are waiting for before the March 21- 22 FOMC Meeting, where there is an estimated addition of 200k new jobs last February; much lower than the January surge of 517k; while the Unemployment Rate (Feb.) is expected to remain stable at around 3.4% (a 5-decade low). Before Friday’s jobs report, Powell will appear before Congress to present the central bank’s semi-annual monetary policy report. His comments will be closely followed for hints on whether a larger than 25 bps rate hike is under consideration. The capital market is expected to remain volatile, in response to the release of numerous corporate earnings reports and global economic data, such as: UK Construction PMI (Feb.), German Retail Sales (Jan.) & CPI (Feb.), Eurozone 4Q22 GDP, UK monthly GDP (Jan.), Japan 4Q22 GDP, China CPI & Trade Balance (Feb.). These are clearly the dynamics that underlie the monetary policy decisions of several central banks this week (Japan, Australia, Canada).
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