RBNZ returns to a hawkish tone. Oil rises on Israeli PM Netanyahu’s rejection of a ceasefire

On the positive side, Walt Disney (DIS) shares rose more than 11% after the company reported first-quarter adjusted earnings per share that beat expectations and projected full-year adjusted earnings per share above consensus. Additionally, Ralph Lauren (RL) is up more than 16% after reporting total comparable sales for Q3, excluding forex, well above consensus. Wynn Resorts (WYNN) closed up more than 6% after reporting Q4 operating revenue of $1.84 billion, exceeding the consensus forecast of $1.74 billion. On the negative side, PayPal Holdings closed down more than 11% after reporting a lower-than-expected number of active customer accounts in Q4 and forecasting full-year adjusted EPS below consensus.

The US weekly initial jobless claims fell by 9,000 to 218,000, indicating a more robust labor market and hawkish Fed policy. Weekly jobless claims fell by 23,000 to 1.871 million, indicating a stronger labor market than expected at 1.875 million.

FRB President Richmond Barkin’s comments on Thursday were somewhat hawkish and lent support to the dollar late in the day when he said the Fed doesn’t need to rush to cut interest rates and would like to see disinflation for a few more months before cutting rates. Markets rate the odds of a 25 bps rate cut at the March 19-20 FOMC meeting at 21% and 74% for the April 30-May 1 meeting.

ECB chief economist Lane said yesterday that the ECB needs more confidence that inflation is returning to target before policymakers can cut interest rates. His counterpart, ECB Governing Council spokesman Wunsch, said he preferred to wait for more data before deciding whether to cut interest rates because Eurozone wage growth is at a level that falls short of the ECB’s 2% inflation target.

Consumer price inflation in Germany was confirmed at 2.9% annualized in January 2024, the lowest since June 2021, thanks to a sharp slowdown in goods inflation (2.3% vs. 4.1% in December). In Norway, the annualized consumer inflation rate fell to 4.7% in January 2024 from 4.8% in the previous month, slightly below market expectations of 4.6%. This was the lowest rate since October 2023.

Crude oil and gasoline prices rose to 1-week highs on Thursday and closed sharply higher. Israeli Prime Minister Netanyahu’s comments pushed crude prices higher on Thursday as he said Israel could achieve total victory over Hamas within months and rejected any cease-fire talks. A continuation of the war threatens to escalate and expand across the Middle East, which accounts for about a third of global oil production.

Natural gas prices fell to their closest low in 3 years on Thursday as an unusually mild winter reduced demand for gas for heating and kept US inventories high. The EIA’s weekly natural gas inventories data on Thursday matched expectations at 75 billion cubic feet. However, inventories remain high, with natural gas inventories 10.6% above the five-year average as of February 2.

Asian markets were mostly up on Thursday. Japan’s Nikkei 225 (JP225) was up 2.10% for the day, China’s FTSE China A50 (CHA50) was down 0.94%, Hong Kong’s Hang Seng (HK50) lost 1.71% by Wednesday’s close, and Australia’s ASX 200 (AU200) was positive 0.39% for the day.

Reserve Bank of Australia (RBA) Governor Michele Bullock said inflation doesn’t need to slow to 2.5% before the central bank moves to cut the money rate. However, she said the RBA would not rule out further interest rate hikes. The central bank acknowledged that inflation fell more than expected in the fourth quarter but was undecided on when inflation would return to its 2-3% target.

The New Zealand dollar surpassed $0.612, hitting its highest level in a week amid speculation of a possible further interest rate hike amid high inflation and a robust labor market. Analysts at ANZ now forecast a quarter-point rate hike by the Reserve Bank of New Zealand (RBNZ) in February and April, taking the rate to 6%. There is now about a 40% chance that the RBNZ will raise the rate on February 28, whereas a week ago, there was virtually no chance of that happening.

Malaysia’s unemployment rate fell to 3.3% in December 2023 from 3.6% in the same month of the previous year. The number of unemployed fell 5.3% from a year earlier to 567.8k, while employment rose 2.0% to a new high of 16.46m.