Market Update: Key Economic Events & Impact on Capital Markets

Joshua Hawley Feb 4th, 2024

Macroeconomic Developments & Market Impact

Last week’s major macroeconomic events—Wednesday’s FOMC decision, Thursday’s GDP report, and Friday’s December PCE data—had limited impact on the markets. However, the focus now shifts to January’s employment report, expected this Friday, which could influence market sentiment and Federal Reserve policy expectations.

One notable risk to global markets is President Trump’s recent executive order imposing 25% tariffs on Canada and Mexico, which took effect over the weekend. These tariffs, intended to pressure U.S. trading partners into assisting with border security, have unsettled investors. While markets initially expected tariffs to serve as a negotiation tool for a broader trade agreement, their implementation raises concerns about U.S. economic growth, inflation, and geopolitical stability. The immediate reaction saw the U.S. dollar strengthen and equities decline, with Dow futures down 570 points this morning.

Bloomberg described these tariffs as “the most extensive act of protectionism taken by a U.S. president in almost a century,” emphasizing their potential impact on inflation, trade flows, and economic expansion.

This Week’s Key Market Events – Jobs Data in Focus

Investors will closely monitor this week’s employment data, which could shape interest rate expectations and impact structured finance and lending conditions. Key reports include:

Monday (Feb 3) – Construction Spending, ISM Manufacturing
Tuesday (Feb 4) – JOLTS (Job Openings), Factory Orders
Wednesday (Feb 5) – ADP Employment Report, Trade Balance, ISM Services
Thursday (Feb 6) – Weekly Jobless Claims
Friday (Feb 7) – Non-Farm Payrolls, Unemployment Rate, University of Michigan Consumer Sentiment

Looking ahead to next week, key events include inflation data (CPI, PPI), Treasury auctions (3-, 10-, and 30-year), and Retail Sales reports, which will provide further insight into consumer demand and inflationary pressures.

Treasury Market & Yield Trends

Treasury yields remain highly sensitive to employment data. This week, market direction will be influenced by Friday’s Non-Farm Payrolls (NFP) report. The consensus expectation is for an increase of 170,000 jobs, with the unemployment rate holding steady at 4.1%.

2-Year Treasury Yield: 4.20% (-7 bps last week)
10-Year Treasury Yield: Started last week at 4.62%, ended at 4.54% (-8 bps)
Yield Curve: The 2s/10s spread flattened by 1 bps, closing at 34 bps

Treasury auctions and Federal Reserve guidance on interest rates will also impact bond markets in the coming weeks, shaping the cost of capital for businesses seeking financing.

Federal Reserve Policy Outlook

At last week’s FOMC meeting, the Fed left interest rates unchanged at 4.25%-4.50%, with no significant changes to its forward guidance. While the language in the Fed’s statement was slightly adjusted—acknowledging that inflation “remains somewhat elevated” rather than highlighting “progress” toward the 2% target—the Fed continues to emphasize a data-driven approach to monetary policy.

Fed Chair Jerome Powell signaled that the central bank is in no rush to cut rates, preferring to monitor labor market conditions and inflation before making policy adjustments. With two employment reports and two inflation reports due before the next FOMC meeting on March 19th, markets remain uncertain about the timing of the first rate cut.

Implied Fed Funds Rate Expectations

March 19 – 4.288%
May 7 – 4.210%
June 18 – 4.102%
July 30 – 4.043%
September 17 – 3.963%
December 10 (Final 2025 Meeting) – 3.870%

While rate cuts are expected later in the year, investors remain focused on inflation trends and economic growth indicators to determine the Fed’s next steps.

How IGA Capital Can Help Amid Market Volatility

At IGA Capital, we specialize in providing structured finance solutions through our global investor network, including DFIs, ECAs, commercial banks, and private capital providers. In a rapidly evolving economic landscape, access to competitive financing is critical for businesses looking to raise equity or secure debt financing.

Corporate & Project Finance – Helping businesses structure funding solutions tailored to market conditions
Trade & Export Credit Finance – Leveraging partnerships with export credit agencies for cross-border transactions
Private Equity & Growth Capital – Assisting companies in accessing institutional and private capital to fuel expansion

If your business is looking for financing solutions amid shifting interest rates and trade policy changes, contact us today to explore strategic funding options.