Japanese final GDP grew by 0.1% q/q, US CPI rose to 3.2% y/y

Weekly Update | 15th March, 2024
Hue Frame

Frame Funds Management

Let’s hop straight into five of the biggest developments this week.

1. Japanese final GDP grew by 0.1% q/q

Productivity in the Japanese economy is lower than previously thought despite shaking off recession concerns in the last quarter of 2023. The final GDP figure rose 0.1% from the preliminary estimate of – 0.1%, but significantly undershot the optimistic market prediction of a 0.3% growth. While not as strong as earlier thought, the Japanese economy demonstrated relative tenacity to alley recession fears.

2. UK claimant count change surged by 16. 8k in February

The UK labour market took a turn for the worse in February as significantly more people sorted unemployment benefits. The claimant count charge rallied by 16.8k from the previous downward revision of 3.1k. This was however less than the gloomy market forecast of 20.3k. High-interest rates continue to stifle labour uptake as businesses opt for automation to save costs.

3. US CPI rose to 3.2% y/y

Inflation is rebounding in the US at a faster rate than initial estimates. The CPI in the year to February rose to 3.2% from the previous 3.1%, catching markets that had bet on a static outcome by surprise. The inference is that US prices are vulnerable to energy prices.

4. UK GDP grew 0.2% in January

The UK economy opened the year on a high to pull out of recession, just as had been predicted by economic estimates. GDP grew 0.2% in January, a marked improvement on the previous – 0.1% shrink. Expansion in the all-important service sector largely accounted for the growth in output.

5. US retail sales surged 0.6% m/m

American retail sales rebounded at a slower pace than anticipated. Retail sales grew 0.6% in February, a significant rise from the previous upward revised figure of – 1.1%. This was however less than the 0.8% market prediction as rising prices at the pump continue to leave Americans exposed to higher prices across board.

As per usual, below shows the performance of a range of futures markets we track. Some of these are included within the universe of our multi-strategy hedge fund. 

*source finviz
*source finviz

Cocoa, soybean oil, and ethanol were hot for the week as wetter and colder than expected conditions persisted with predictions pointing to a further continuation. The energy complex surged on longstanding supply chain bottlenecks in the Red Sea as well as US military targeting of Iranian oil infrastructure for the first time since the Middle East debacle began. The VIX receded as investors discounted geopolitical risk to seek alpha in commodities as greed outstripped fear. Great demand for commodities left global indices vulnerable with most flat or down. Coffee and cotton were however down on oversupply.

Here is the week's heatmap for the largest companies in the ASX.

A mixed but largely bearish week for the ASX with most stocks trending downward across sectors. Financials were mixed with a bearish bias. REA and NAB led the slip to close -3.92% and – 2.25% respectively as most stocks in the sector closed in the red. SGP and SUN however demonstrated relative strength to close up over 2.7%. Similarly, non-energy miners were mixed but trended down overall. Led by FMG’s – 6.73% sell-off, the sector sold off significantly but found support as MIN and S32 did most of the heavy lifting. Retail companies were green across the sector without exception, while health tech, tech services, transporters, utilities, and communications were all mixed.

Below shows our proprietary trend-following barometer which captures the number of futures contracts within our universe hitting new short and long-term trends.

*source Frame Funds Research

Please reach out if you’d like to find out more about how our quantitative approach captures the price action covered above, or if you would like to receive these updates directly to your inbox, please email admin@framefunds.com.au

This information is prepared by Frame Funds Management Pty Ltd (ACN 608 862 442) (Frame Funds, we or us) is a Corporate Authorised Representative (CAR No. 123 9068) of Primary Securities Limited (ACN 089 812 812 635) and is intended only for "wholesale clients" within the meaning of sections 761G and 761GA of the Corporations Act 2001 (Cth). This material is not intended to constitute advertising or advice (including legal, tax or investment advice) of any kind. These materials are not to be distributed to any person who does not qualify as a wholesale client and must not be copied, reproduced, published, disclosed or passed to any other person at any time without the prior written consent of Frame Funds. Primary Securities Ltd (ACN 089 812 635 635, AFSL 224 107) is the Trustee of, and issuer of units in, the Frame Futures Fund and the Frame Long Short Australian Equity Fund (Funds). In deciding whether to acquire, or to continue to hold, units in the Fund please read the current Information Memorandum available from Frame Funds. Past performance of the Funds is not a reliable indicator of future performance. The value of an investment in the Funds may rise or fall. Returns are not guaranteed by any person. Total returns are calculated before tax and after ongoing management costs. In preparing this information, we have not considered your investment objectives, financial situation or personal circumstances and therefore the Funds may not be suitable for you. Neither Frame Funds, Primary Securities Ltd, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. Any rates of return, forecasts or estimates contained in this publication are not guaranteed. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

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Hue Frame
Frame Funds Management

Hue Frame is the founder of Frame Funds Management. Frame Funds is a quantitative funds management company, that manages assets for institutional and wholesale clients, and proprietary funds.

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