Financial markets globally have ascended to unprecedented heights this week, buoyed by the sustained excitement around artificial intelligence and growing anticipation of rate cuts by the Federal Reserve and the European Central Bank in June.

Jerome Powell’s addresses to Congress initially bolstered these expectations, which were further fueled by Christine Lagarde’s announcement of reduced growth and inflation forecasts for the eurozone in 2024.

This confluence of factors has kept the appetite for riskier assets robust, especially as the latest US employment report hints at a supportive backdrop for such monetary policy adjustments, despite a surge in job creation that exceeded forecasts.

This Week’s Highlights: Winners and Losers

Winners:

• Hewlett Packard Enterprise (HPE) saw a 17% spike despite underwhelming results, as the market’s focus shifted to its potential gains from the AI-driven demand for optimized servers, mirroring the trajectory of Dell.
• Super Micro Computer enjoyed a 26% leap following its impending inclusion in the S&P 500, highlighting investor confidence, particularly in the thriving AI market.
• Celsius surged by 13% after reporting stellar quarterly and annual results, doubling its revenues over the year and transitioning from a loss to a substantial profit.
• Consumer Stocks like Kroger, Target, and Burlington Stores celebrated gains between 8% and 13%, buoyed by strong quarterly results and positive consumer confidence indicators.
• Lyft jumped 15% on projections by RBC Capital Markets about its potential collaboration with DoorDash, envisaging a competitive edge against Uber.

Losers:

• Foot Locker faced a 30% decline after publishing disappointing results and a bleak outlook, extending the suspension of its dividend to focus on investments.
• Gitlab fell by 21%, as its modest forecasts for the upcoming quarter and year, lacking the AI sparkle, did not sit well with Wall Street’s expectations.
• Electric Vehicle Manufacturers like Li Auto, Tesla, and Vinfast Auto saw significant declines, amid a downturn in EV sales in China and a challenging global outlook.
• Sofi dropped 17% after announcing a senior convertible debt offering, exacerbating its year-to-date losses.
• Entain plummeted 18%, reporting an escalated net loss due to rising expenses and facing regulatory challenges ahead.

Commodities

Energy: Oil prices stalled overall, despite a busy week on the oil news front. For a start, it was OPEC, and more specifically Saudi Arabia, that caused a stir, not because the cartel extended its production quotas, but because the Saudi Kingdom raised its official selling prices to its Asian customers. Let’s stay in Asia with China, which unveiled its latest trade figures, showing oil imports up year-on-year, but with a trend towards slower growth month-on-month. We end this world tour with the United States, where weekly inventories continue to rise, albeit modestly. In terms of prices, Brent crude is trading at around USD 82.50, while WTI is trading at around USD 78.

Metals: What can we learn from China’s latest economic data? Metal imports and exports are fairly robust, a sign that industrial demand is improving. Metal prices are reacting positively: a tonne of copper is trading at USD 8,600 in London, aluminum is up to USD 2,250 and zinc is gaining ground at USD 2,530. Nevertheless, the star of the moment is among precious metals. We are of course referring to gold, which posted a third consecutive week of gains to USD 2172. Dollar-denominated gold hit an all-time high thanks to bets on lower interest rates, which favors the precious metal, an asset which, by definition, delivers no yield.

Agricultural products: In Chicago, the euphoria seen on stock markets was far from over, as grain prices continued to slide. Wheat broke through its 2023 low and is now trading at around USD 525, a level not seen since 2020. Corn put up more resistance, rising to 440 cents a bushel. Elsewhere, cocoa remains high at USD 6,500 per tonne.

Crypto. Bitcoin (BTC) continues to soar this week, and even had the luxury of breaking through its all-time high. On Tuesday, the digital currency momentarily reached $69,250, beating its previous record of November 2021, when bitcoin reached $68,900 at its peak. This performance was largely due to the constant influx of capital into Bitcoin Spot ETFs. BlackRock’s Bitcoin ETF now has over $12 billion in assets under management. Bitcoin is up over 7% since Monday, and is currently trading at around $68,000. This enthusiasm for the market leader is spreading to other crypto-currencies, including Ethereum (ETH) at +13.5%, which is also approaching its all-time high, Solana (SOL) at +14% and assets such as Floki memecoins (FLOKI) at +56% and Shiba Inu (SHIB) at 64%.

Atmosphere

Good boy! Jerome Powell played its part well at his double testimony before the US Congress. It’s important not to rush into anything, while being aware of the risks of an overly restrictive policy on the health of the US economy. In short, he left the door open to a first rate cut in June, which is all the market was waiting for. Meanwhile, employment continues to be resilient. The US created 275k non-agricultural jobs in February, against an estimate of 200K. On the other hand, the unemployment rate was slightly higher than expected at 3.90% vs. 3.70%. Overall, these data were well received: the 10-year yield continued to ease on Friday afternoon, and is now testing 4.07%. Outside the US, China once again blew hot and cold: the targets set by the authorities for 2024 are rather ambitious, but the market finds it hard to see how they can be achieved unless Beijing introduces more promising public policies. In Europe, the ECB has left rates unchanged and looks set to start cutting them in June. 

Looking Ahead

The market’s optimism is primarily hinged on the potential for rate cuts by major central banks, with the US set to provide further economic data next week that could influence these expectations. Upcoming reports on inflation, producer prices, and consumer sentiment will be key focal points, alongside earnings releases from major companies like Gitlab, Williams-Sonoma, Adobe, and On Holding.

As the financial landscape navigates through these developments, the overarching sentiment remains cautiously optimistic, with investors and traders closely monitoring central bank cues and economic indicators to refine their strategies in a market teeming with both opportunities and uncertainties.

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