February 16, 2023: The Latest Market Movements

US Retail Sales Rebounded and Supported the Dollar Increase.

The US dollar rose Thursday, February 16th, after robust US retail sales data supported the resilience of the world’s largest economy, fueling expectations that the Federal Reserve still has more interest rate hikes ahead of it.

US retail sales rebounded sharply in January, after declining for two consecutive months, driven by purchases of cars and other goods, the US Commerce Department reported on Wednesday. The dollar rose after the data release and held on to most of those gains today, Thursday. The dollar index rose from 0.07% to 103.87 after hitting a six-week high of 104.11 in the previous session.

The Australian dollar fell after data showed today, Thursday, a sudden decline in employment in January for the second month in a row, while the unemployment rate jumped to its highest level since May. The Australian dollar fell by more than 0.5% to its lowest level in a day at $ 0.6868, and it was last recorded at $ 0.6872.

The euro settled at $1.0687, while the New Zealand dollar fell 0.28% to $0.6263. The British pound fell 0.19% to $1.2015 after falling more than 1% in the previous session.

Data released Wednesday showed that British inflation slowed more than expected in January. There were signs of easing price pressure in parts of the economy that the Bank of England is watching closely. This has increased the indications that the Bank of England will rule out more significant interest rate hikes.

The yen rose slightly to 134.07 against the dollar after getting some support from the nomination of Kazuo Ueda as the new central bank governor, raising market expectations that he will end Japan’s ultra-low interest rates sooner than expected.

Gold Regained a Little of its Lusters.

Gold prices regained momentum Thursday, February 16th, with the decline in the dollar, but the prospect of the Federal Reserve raising interest rates again kept investors on edge. Spot gold rose 0.3% to $1,840.94 an ounce after hitting its lowest level since early January on Wednesday. US gold futures rose 0.3% to $1,850.20.

High-interest rates discourage investing in gold, which does not yield a return, although it is considered a hedge against rising prices.

Data on Wednesday showed that US retail sales rebounded in January after declining for two straight months, indicating the continued resilience of the economy despite higher borrowing costs.

Strong retail sales figures and data released on Tuesday showing continued high inflation in the US last month reinforced fears that the Federal Reserve will keep interest rates high for longer.

The dollar index fell 0.3% after reaching a 6-week high on Wednesday, making gold priced in the US currency less expensive for buyers abroad. The benchmark 10-year Treasury bond yields recorded their highest since January 3. As for other precious metals, silver rose in spot transactions by 0.7% to $21.77 an ounce. Platinum rose 0.6% to $920.16, and palladium rose 1% to $1,479.16.

Oil Rises Despite the Increase in US Inventories.

Oil prices rose in early Asian trading Thursday, February 16th, while the market ignored the significant increase in US crude stocks and the International Energy Agency raised its forecast for demand. Brent crude futures rose 26 cents to $85.64 a barrel, while US crude futures rose 34 cents to $78.93.

The Energy Information Administration said US crude stocks jumped last week to 471.4 million barrels, increasing by 16.3 million, the highest level since June 2021. The increase, which was larger than expected, was mainly due to adjusting the data, which analysts said mitigated its impact on oil prices.

Prices also received support from the International Energy Agency’s expectation that oil demand will rise by two million barrels per day in 2023, an increase of 100 thousand barrels per day from last month’s expectations, to a record level of 101.9 million barrels per day, and that China is the source of 900 thousand barrels per day of the increase.

The agency said China would account for nearly half of oil demand growth in 2023 after it eases COVID-19 restrictions.

Limited Gains for US Indices.

US indices closed with limited gains in Wednesday’s session after stronger-than-expected retail sales data showed evidence of resilience in the US economy. Still, gains were capped as investors worried about further interest rate hikes by the Federal Reserve in the coming months. 

The S&P500 index rose by 11 points, or 0.28%, to close at 4147 points. The Dow Jones index rose 35 points, or 0.11%, to 34128 points. The Nasdaq Composite Index achieved the highest gains among US indices after rising by more than 100 points, or 0.92%, to close at 12070 points.

Roblox stock jumped more than 26% in Wednesday’s session, hitting its highest level in about four months. The company reported that average daily active users increased by 19% in the fourth quarter to reach 58.8 million, and fourth-quarter bookings reached $899.4 million, an increase of 17% over the previous year and 21% over the year.

Shares of Taiwan Semiconductor Manufacturing Company (TSMC) listed on the New York Stock Exchange fell by more than 5%, recording the most considerable daily loss in 3 months. The Berkshire Hathaway company of billionaire “Warren Buffett” has announced the reduction of its stake in the chip maker.

The US Might be in Debt Default by July.

The US Congressional Budget Office has warned that the United States could default on its debt sometime next summer if Congress fails to act and raise the debt ceiling. The director of the Congressional Budget Office, Philip Swagle, expects that the government’s ability to lend using exceptional measures will run out between July and September if the debt ceiling remains unchanged.

It is important to note that America reached the legal limit on issuing new federal debt at $31.4 trillion last month, and the Treasury Department began taking extraordinary measures. Swagle added that in case of default, the government would postpone payments on some activities, fail to pay its obligations or both.

US Treasury Secretary Janet Yellen warned of a financial and economic catastrophe in America if it defaulted on debt repayment.

Japan’s Topix Closed at 2-Month-High.

The Japanese Topix index closed Thursday, February 16, at its highest level in two and a half months. The incline was supported by the recovery of auto and tire companies after the yen’s decline, and the rise of Wall Street at the close last night raised market sentiment. The Topix index rose 0.71% at close to 27,696.44 points.

“The weak yen lifted sentiment. There weren’t many signs of market movement, but the market was holding,” said Shigetoshi Kamada, director of research at Tachibana Securities.

The yen hovered near a six-week low against the dollar after vital US retail sales data sent the US currency higher. The auto sector jumped 1.8%, with Toyota Motor up 2.08% and Honda Motor up 1.16%. Tire manufacturers also rose 1.73%, with Bridgestone increasing by 1.67%.

Sumitomo Rubber Industries rose by 3.81%, and Yokohama Rubber rose by 1.85%. The chip-making equipment maker Tokyo Electron rose 0.9%, and the chip-testing equipment maker Advantest jumped 0.99%. Paper and pulp manufacturing companies fell 0.77%, with this sector recording the worst performance among the sub-indices.

According to Kamada, the increase in foreign visitors has raised economic growth expectations. The number of visitors to Japan jumped to nearly 1.5 million in January, the national tourism agency said on Wednesday, indicating an acceleration in tourism recovery after the government lifted COVID-19 restrictions in October.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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