Markets On Thursday, U.S. stock indexes remained subdued as markets paused at elevated levels, with the S&P 500 hovering just shy of the symbolic 5,000-point milestone. Investors were carefully assessing significant corporate earnings releases, secondary jobs data, and statements from policymakers regarding expectations for interest rate cuts. While it's not uncommon for markets to pause and consolidate after reaching significant levels, there's speculation that tomorrow's CPI revisions might dampen recent optimism about inflation. This could shift investor sentiment, which has been relatively resilient to the recent subtle backup in U.S. yields over the past week, considering that correlations can fly as quickly as they stick.  Indeed, even Treasuries faced challenges in gaining traction despite a robust $25 billion sale of long-term bonds, which concluded a week of increased issuance sizes.  U.S. yields continued to climb despite the successful 30-year auction, which helped alleviate concerns about oversupply, clearly indicating some caution ahead of tomorrow's CPI revisions. Yet stocks levitated near record height, driven once again by an increasingly narrower group of shares, which has analysts forever worried about concentration risk. The update of CPI seasonal adjustment factors last year was significant, revealing that inflation momentum was more substantial than previously believed at the end of 2022. This caught both the market and the Federal Reserve by surprise. On Friday, the market will be closely watching the 2023 update to see its implications for the timing of the first Fed rate cut this year. U.S. jobless claims were a non-event on Thursday. I mention them only in the context of the two prior weeks, which saw meaningful increases. The recent two-week uptick in initial jobless claims might have been another false dawn. Initial claims have consistently disappointed recession claimants, as each minor increase tends to dissipate quickly against the backdrop of the resilient underlying labour market. It only reinforces investors' awareness of the labour market's resilience, providing the Federal Open Market Committee (FOMC) with sufficient leeway to postpone any considerations of rate cuts. Oil Markets Crude oil leapt higher as Israel took hope for a ceasefire agreement off the table, triggering a wave of buying as geopolitical risk went on the boil again. Prime Minister Benjamin Netanyahu said that he sees no other solution than total victory following a counteroffer from Hamas for a ceasefire. This comes amid a military escalation against Iranian-backed " terrorist" factions by the U.S. and U.K. concerns.  Forex Markets The yen continued to weaken overnight as traders were caught off guard by Bank of Japan comments. Speculation was rife among market participants that Deputy Governor Uchida could signal that the BoJ is moving closer to raising rates as early as the next meeting in March. However, nothing could have been further from the speculative truth. He suggested that the BoJ would continue to support the JGB market through bond purchases even after Yield Curve Control (YCC) has formally been brought to an end, aiming to avoid a surge in yields. China Markets The recent macroeconomic news of China on Thursday added to the prevailing pessimism. The Consumer Price Index (CPI) print for January was worse than anticipated, with prices falling by 0.8% year-on-year, surpassing economists' expectations of a 0.5% decline and marking the weakest reading since 2009. Additionally, Producer Prices slipped by 2.5% from a year ago, reflecting ongoing factory gate deflation over the past 16 months. Consumer sentiment in China remains dismal, with many still reeling from the effects of the Shanghai lockdown. The government's response to the lockdown, now led by Premier Xi's appointed figure, has not alleviated the consumer confidence crisis. The problem extends beyond credit supply issues and is exacerbated by the lingering effects of the property crackdown. Burdened by excessive leverage, local governments face constraints in implementing meaningful fiscal stimulus measures. There is growing consensus that the central government must take decisive action, potentially including fiscal stimulus akin to helicopter money, to address China's economic challenges. Urgent action is needed to restore confidence and stimulate economic growth. If policymakers do not act decisively and quickly, they might fritter away one of the most significant economic breakthroughs ever.  

XAU/USD Current price: 2,0331.60 Government bond yields and Fed's speakers lead the way. Robust United States employment figures further undermined rate cut odds. XAU/USD volatile price action ended without providing directional clues. Spot Gold hovers around $2,030 in the American session, posting modest intraday losses on Thursday. The US Dollar remained weak during Asian trading hours, picking up some steam ahead of Wall Street's opening but holding within familiar levels. In the absence of relevant macroeconomic data, market players are taking clues from yields and central banks' speakers. The yield on the 10-year US Treasury note surged intraday to 4.16% following United States (US) employment data. The country reported that weekly unemployment claims rose to 218K in the week finished February 2, beating the 220K expected. Robust data from the labor sector further undermined the rate-cut odds in the country. Meanwhile, remarks from Federal Reserve (Fed) officials align with Chair Jerome Powell's comments following the central bank monetary policy meeting. American policymakers are confident inflation is in the right direction but maintain the cautious stance of waiting for more data to confirm it will keep trending lower. Overall, market participants are trying to digest the fact that rate cuts could be less than initially expected this year. XAU/USD short-term technical outlook XAU/USD fell to an intraday low of $2,020.08, recovering $10 afterwards, and went back to its comfort zone. The pair is technically neutral according to the daily chart, still stuck around a directionless 20 Simple Moving Average (SMA). The longer moving averages remain far below the current level, partially losing their upward strength. Finally, technical indicators have returned to consolidate around their midlines, reflecting the lack of directional conviction. For the near term, the upward potential seems limited. XAU/USD briefly dipped below all its moving averages, which anyway lack directional strength, but quickly returned to above the 20 and 100 SMAs. Technical indicators, in the meantime, turned back north but remain around neutral levels, failing to provide fresh clues. Support levels: 2,022.75 2,009.10 1,988.90 Resistance levels: 2,044.60  2,053.10 2.065.60

EUR/USD edges higher toward 1.0800 after posting marginal gains on Wednesday. The near-term technical outlook points to a bullish tilt. A significant increase in US Initial Jobless Claims could hurt the USD. EUR/USD registered small gains on Wednesday and continued to push higher toward 1.0800 early Thursday. Although the pair's near-term technical outlook highlights a bullish tilt, technical buyers could stay on the sidelines until 1.0800 is confirmed as support. Improving risk mood made it difficult for the US Dollar (USD) to find demand on Wednesday but a late recovery in US Treasury bond yields helped the currency limit its losses, capping EUR/USD's upside. Meanwhile, European Central Bank (ECB) policymakers continue to push back against market expectations for an early policy pivot and support the Euro. ECB Executive Board member Isabel Schnabel said that they must remain patient and cautious on risks of inflation flaring up again. Similarly, Governing Council member Boris Vujcic argued that they shouldn't rush to lower rates, citing resilience in services inflation and wages.

Hawkish comments from the Federal Reserve members continued to make the headlines in the US, yesterday, with Susan Collins, Thomas Barkin and a new Fed Governor Adriana Kugler, all saying the same exact thing: that there is no hurry for the US to cut the interest rates. But knowing that the Fed is done hiking its rates and the expectation that the next move from the Fed will be a rate cut is enough to keep the market in a sweet spot. The US had a record-breaking auction for its 10-year bonds yesterday, where it sold $42bn worth of notes at a lower than anticipated yield, the S&P500 renewed record and traded at a spitting distance from the 5000 psychological mark. Disney followed in the footsteps of its happy tech peers yesterday and rose almost 7% in the afterhours trading. Sentiment was less cheery in Germany after the commercial real estate stress jumped to Germany. Meanwhile in China, the CSI traded mixed after the announcement of deeper deflation in January. Alibaba missed the opportunity to break above its down-trending channel that has been building since last August as its shares dived 6% after its sales missed expectations in the latest Q4 report. 

The Chinese economy is stabilising but the only fireworks will come from the new year celebrations which begin on 11 February as momentum remains weak . Mission accomplished on 2023 GDP as growth stabilises You could say it's 'mission accomplished' as data over the past month confirms that the Chinese economy beat its 2023 GDP growth target and growth certainly stabilised. But as people celebrate the Chinese New Year, sentiment seems weak. Key activity data won't be published this month, so expect a period of calm before the much anticipated annual parliamentary gathering, the Two Sessions, in early March. China's GDP growth for the fourth quarter rose from 4.9% year-on-year to 5.2%, bringing 2023 full-year growth to 5.2% YoY, exceeding the 5% growth target set at last year's Two Sessions. China 2023 GDP growth managed to beat the 5% target Monthly indicators show few signs of growth dynamism The property sector remains the largest drag on the economy. Real estate investment slumped to -9.6% YoY at the end of 2023, while the number of buildings sold also dropped 6.5%. Secondary market property prices fell 8.9% from the peak, while 39 of the National Bureau of Statistics's 70-city sample saw a more than 10% decline from the peak. Trade is dragging on growth. Last year, the trade balance was down 3.4% YoY to USD858.6bn, while exports and imports fell 5.1% YoY and 5.6% YoY, respectively. The silver lining is that there have been some signs of a bottoming out in the past several months; December exports fell to the lowest YoY level in eight months, and imports recovered to positive YoY growth. Consumption was the main growth driver, but while month-to-month volatility has been high, retail sales growth has been trending down overall, ending the year at 7.2% YoY and has yet to reclaim pre-pandemic levels of growth despite a favourable base effect. The most encouraging sign has been a clear acceleration in credit growth. Aggregate financing had all but stagnated, growing just 1.3% YoY over the first seven months of 2023 before a shift in policy tone in August prompted a 32.2% YoY growth for the final five months of the year. China activity monitor PMI data points to a soft start to the year So, keep in mind that China bundles many January and February indicators for publication in March and, as we said, momentum remains soft. The January manufacturing PMI came in at 49.2, and that was slightly below expectations. But it did trend in the right direction with a smaller contraction than in December. The Chinese manufacturing sector remains under pressure amid a weak domestic recovery and poor external demand. The manufacturing PMI has been under 50 for nine of the past ten months. Sub-indices pointed to a small recovery in new orders but further deterioration of employment. China PMI showed manufacturing remains in contraction Policy direction remains supportive to start the year Growth stabilisation has been the key theme for policymakers in the last few months, and we saw many piecemeal supportive policies released both on a provincial and national level. Some of the highlights include discussions of a market stabilisation fund, as well as the continued rollout of property market policies such as city-level project whitelists. While the People's Bank of China (PBOC) refrained from cutting rates in January, it did announce a 50bp cut in the required reserve ratio (RRR) to take effect from 5 February. The cut was the largest since 2021 and provides, in theory, up to RMB1tn of liquidity to markets. The PBOC also broadened access to commercial loans for property developers by allowing bank loans pledged against developers' commercial properties to be used to repay other loans and bonds until the end of the year. It also cut the refinancing and rediscount rates for rural and micro-loans by 0.25 basis points to 1.75%. Largest RRR cut since 2021 may be a signal of more policy support to come Markets await the Two Sessions to set the tone for 2024 Soon after the Lunar New Year, the Chinese government will hold its annual Two Sessions, which refers to the plenary sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). The Two Sessions are typically the most important policy meetings of the year, and will start on 4-5 March. This year, there is a higher-than-usual level of uncertainty as the Third Plenary Session (traditionally a fourth-quarter meeting where the economy is the main focus and various reforms and new measures are announced) was postponed. As such, the Two Sessions meetings will be highly scrutinised for any new policy signals. Regarding economic targets, we feel it is unlikely we will see major movements here. Premier Li Qiang's comments at Davos and the provincial-level 2024 GDP targets indicate...

Gold price is stuck in a familiar range between $2,030 and $2,040 early Thursday. Risk-on rally in global stocks weighs on the US Dollar amid subdued US Treasury bond yields.   The path of least resistance for Gold price appears to the upside but $2,050 holds the key. Gold price is finding buyers early Thursday to take on the $2,040 barrier once again, having failed to resist above the same since last Friday. Gold price is capitalizing on the risk-on sentiment-driven US Dollar (USD) weakness while sluggish US Treasury bond yields also remain supportive. All eyes remain on mid-tier US jobs data and more Fedspeak The US Dollar is extending its downbeat momentum into Asian trading on Thursday, undermined by muted US Treasury bond yields and a risk rally seen on global markets. Asian stocks track the US equities higher, as the S&P 500 index closed at a record high, courtesy of strong earnings and increased expectations of a 'soft-landing' for the US economy. Markets also stay cheerful on expectations that more policy support measures from China could come through, as the country continues to battle deflation. China's prices fell at the fastest pace in 15 years, reflected by the 0.8% decline in the Consumer Price Index (CPI). China's Producer Price Index (PPI) fell 2.5% from a year earlier in January after a 2.7% decrease reported in the previous month. Gold price is also capitalizing on China's stimulus optimism, as the dragon nation is the world's top consumer of the yellow metal. However, traders are expected to take account of the recent less dovish commentary from the US Federal Reserve (Fed) policymakers, limiting the upside attempts in the Gold price. Boston Fed President Susan Collins said on Wednesday, "for the moment, policy remains well positioned, as we carefully assess the evolving data and outlook," adding it will be "appropriate to begin easing policy restraint later this year." Richmond Fed President Thomas Barkin, "I am very supportive of being patient to get to where we need to get. There's still a reasonable amount of uncertainty" on inflation. Meanwhile, "sitting here today I would say two to three cuts would seem to be appropriate for me right now...that's my gut based on the data we have so far," Minneapolis Fed President Neel Kashkari said in an interview with broadcaster CNBC. Later in the day, Gold traders will brace for more Fedspeak, with Barkin set to speak again. Also, the US weekly Jobless Claims data will be closely watched after the Initial Jobless Claims increased to a seasonally adjusted 224,000 for the week ended Jan. 27. The Fed commentary and the US data could help markets repricing the Fed rate cut bets for this year, providing a fresh trading impetus to Gold price. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price continues its battle with the $2,030-$2,035 region. That level is the confluence of the 21-day and 50-day Simple Moving Averages (SMA). The 14-day Relative Strength Index (RSI) is trading listlessly just at the 50 level, pointing to a further rangebound movement in Gold price. If Gold price holds the fort above the $2,030-$2,035 demand area, the immediate powerful resistance for Gold price is seen at the $2,050 psychological level. The next critical supply zone for the bright metal is seen at around $2,065. To the downside, Gold sellers need to seek a decisive close  below the abovementioned $2,035-$2,030 area. Further down, a test of the $2,000 threshold if the $2,010 round figure gives way.