BOJ Might End Negative Rates Amid Growth Revision

Equities

The FTSE 100 recorded a slight decline last week, ending 0.4% lower amidst losses in aerospace and defence sectors. This performance marked its third consecutive week of losses, trailing behind its European and US counterparts. The midcap FTSE 250, however, fared better, ending the week up by 1.3% and showing a modest gain of 0.1% on the final day of trading.

DS Smith stood out with a notable increase of 5.2% after news of an all-share offer from Mondi, valuing DS Smith at 5.14 billion pounds. Despite this positive movement for DS Smith, Mondi's shares dropped by 2.3%.

Across the pond in the US, both the S&P 500 and Nasdaq experienced declines from record highs, primarily driven by a reversal in chip stocks and mixed signals from the labour market. The S&P 500 lost 0.65%, while the Nasdaq fell by 1.16%. Notably, Nvidia saw a significant drop of 5.6%, ending a six-session winning streak. Broadcom's shares also fell by 7% following a disappointing full-year forecast, and Marvell Technology's shares tumbled 11.4% due to a weak first-quarter earnings forecast.

Additionally, US job growth in February outpaced expectations with a rise in nonfarm payrolls, but the unemployment rate increased to 3.9%, and wage growth moderated. These developments come as Federal Reserve Chair Jerome Powell indicated the central bank might be close to cutting interest rates due to falling inflation confidence.

Forex & Commodities

Last week, the US dollar weakened against most major currencies, marking its poorest weekly performance against the euro this year. Despite an increase in nonfarm payrolls, the unemployment rate rose to 3.9% in February, fuelling optimism for a potential rate reduction later in the year.

The euro, benefiting from the dollar's weakness and the European Central Bank's (ECB) cautious stance on future rate cuts, notched up nearly 1% for the week, its best since late December.

The Japanese yen also strengthened, reaching a five-week high against the dollar amid speculation that the Bank of Japan might increase interest rates. This shift in the yen's value reflects growing expectations of a change in Japan's monetary policy.

In the UK, the pound gained against both the euro and the dollar after signs that the ECB and the Federal Reserve might cut rates sooner than the Bank of England.

Gold prices paused after hitting a record high, with traders looking forward to US inflation data for clues on rate cut timing.

Oil prices, on the other hand, faced downward pressure due to concerns over slow demand in China, despite ongoing geopolitical risks in the Middle East and Russia.