DAILY MARKET NEWS - 03-01-2024

Ariff Azraei

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The US government's debt pile just reached a staggering $34 trillion, sparking alarm on Wall Street and beyond. This "depressing achievement," as a watchdog group called it, is mounted by rising deficits and has interest payments exceeding defence spending. Policymakers face a stark choice: raise taxes, cut spending, or risk higher interest rates and slower economic growth. This debt mountain casts a long shadow over the markets and future prosperity, demanding immediate attention and decisive action, although faltering rates may provide some relief and time to adjust.


Wall Street started the year with a tear, with tech giants pulling the S&P 500 and Nasdaq lower on Apple's downgrade and reinflated Treasury yield. While 2023 saw stellar gains on hopes of rate cuts, investors turned cautious as they awaited key data to confirm the anticipated easing cycle. Sectors like healthcare and energy bucked the trend, highlighting a market seeking diversification after consecutive unrelenting gains.


Gold inched higher on Wednesday while a stronger dollar capped gains as investors awaited minutes from the Fed's December meeting for clues. Lower rates, seen as increasingly probable after easing inflation and the Fed's softening stance, would bolster non-yielding gold by reducing its holding cost. However, the precious metal could face headwinds from a firmer dollar and geopolitical tensions in the Middle East.


Crude continued weakening even on geopolitical anxieties and economic headwinds. Although Red Sea tensions and potential OPEC intervention offered slight comfort, a rebounding dollar and doubts over early US rate cuts left prices hanging on a supply glut.


Asian currencies slumped Wednesday as the dollar firmed, weak Chinese data, Japanese earthquake, and a cautious risk appetite after Wall Street's sour start to the year. The greenback found further support from elevated U.S. Treasury yields and anticipation of Federal Reserve minutes that could reduce hopes for early rate cuts. Broader risk aversion saw the Australian and New Zealand dollars retreat, while the euro and sterling tumbled to multi-month lows.