Inflation is falling in Switzerland. Oil declines despite OPEC+ countries extending production cuts

Comments from Atlanta Fed President Bostic expects the Fed’s first interest rate cut in the third quarter to be followed by a pause to assess how the policy change affects the economy. Bostic added that he is concerned that businesses have too much optimism, and after a rate cut, it could spark a surge of new demand that would add to price pressures. Markets rate the odds of a 25 bps rate cut at 2% for the March 19-20 FOMC meeting and 21% for the April 30-May 1 meeting.

Swiss inflation fell in February to its lowest level in nearly two and a half years. Consumer prices were 1.2% from a year earlier, down from January’s 1.3%, though slightly above the 1.1% forecast. The SNB met its target from May 2023 despite rising rents, higher sales tax, and energy prices. Lower inflation increases the likelihood that the SNB will cut rates at its next meeting on March 21. The probability that the SNB will cut rates from the current level of 1.75% is estimated by markets at 66%.

WTI crude futures fell to around $78.5 a barrel on Tuesday, declining for a second straight session, as lingering demand concerns overshadowed an extension of supply cuts by OPEC and its allies. Analysts argued that subdued growth in global oil demand is likely to counter OPEC+ production cuts, raising questions about its output policy. Investors also priced in developments at a key policy meeting in China, where the government set its economic growth target 2024 at around 5%, matching expectations.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped 0.50%, China’s FTSE China A50 (CHA50) declined 0.13%, Hong Kong’s Hang Seng (HK50) gained 0.04% on the day, and Australia’s ASX 200 (AU200) was negative 0.13% on Monday.

China’s Caixin Services PMI fell to 52.5 in February 2024 from 52.7 in January. It was the 14th consecutive month of growth in service sector activity but the slowest pace since November last year amid subdued growth in total new work. The growth rate in new orders changed little and remained below the 2023 average.

Jibun Bank’s Japan Services PMI was revised upward to 52.9 in February 2024 from 52.5 after a four-month high of 53.1 in January. This marked the 18th consecutive month of growth in the services sector, helped by the sharpest rise in new business starts since August last year due to tourism demand and new product launches. However, growth was mainly driven by domestic demand.

Final data showed that the Judo Bank Flash Australian Services PMI business activity index rose to 53.1 in February from 49.1 in the previous month. This was the first rise in service sector activity in five months and the fastest since April 2023, as renewed growth in new orders led to a rebound in business activity. Improving demand conditions boosted activity in the services sector, with improved economic conditions and increased inquiries contributing to another rise in new work. New export orders also returned to growth for the first time since September 2023, supported by new customers and increased interest from customers in Asia.