Market Review March 19, 2024

Today's Economic Event Overview: 

• Building Permits (Feb): The actual figure for building permits came in at 1.518 million, surpassing both the forecast (1.500 million) and the previous month's figure (1.489 million). This suggests a strengthening in the housing construction sector, which is a positive indicator of economic confidence and consumer spending capacity.

• Housing Starts (MoM) (Feb): February saw a significant recovery in housing starts, with a 10.70% increase compared to a sharp decline of 12.30% in the previous month. This rebound indicates a resurgence in residential construction activities.

• Housing Starts (Feb): The number of housing starts in February was 1.521 million, considerably higher than both the forecast of 1.430 million and the previous result of 1.374 million, confirming a strong housing market.

• Atlanta Fed GDPNow (Q1): The Atlanta Fed's GDPNow model estimate for Q1 GDP growth is at 2.10%, slightly below the previous estimate of 2.30%. This adjustment suggests a slight moderation in economic growth expectations.

• 20-Year Bond Auction: The yield on 20-year bonds was 4.54%, slightly lower than the previous yield of 4.60%. This decrease in yield could indicate investor confidence and a move towards longer-term securities amidst stable economic conditions.

• TIC Net Long-Term Transactions (Jan): Long-term foreign investments in U.S. securities totaled $36.1 billion, significantly below both the forecast of $95.5 billion and the previous month's robust inflow of $158.6 billion. This drop could suggest a cooling off in foreign investment.

• API Weekly Crude Oil Stock: Crude inventories showed a decrease of 1.519 million barrels, against a forecasted increase of 0.077 million. This reduction in stocks typically suggests higher demand or lower supply, potentially leading to higher oil prices.

Impact Analysis

• Impact on USD:
• Strong data in housing starts and building permits generally supports the USD as they signal robust economic activity.
• The Atlanta Fed GDPNow revision downwards could pressure the USD due to tempered economic growth expectations.
• Lower foreign investments as indicated by TIC transactions might negatively impact the USD in the short term.
• Impact on Gold:
• Increased economic confidence and potential for higher interest rates (suggested by housing market data) typically reduce the appeal of gold as a safe haven.
• The lowered GDP forecast and decreased foreign investment could, however, increase gold's attractiveness as a hedge against uncertainty.
• Impact on Equity Futures:
• Positive developments in the housing market are likely to bolster equity markets, especially sectors related to construction and real estate.
• However, the mixed signals from reduced GDP forecasts and fluctuating foreign investment might lead to some volatility in equity futures.

Overall, the mixed economic data presents a nuanced outlook. While the housing market shows strength, concerns about GDP growth and reduced foreign investments could create mixed sentiment among investors.