31 Jan

The rise in US stock indices returned some optimism to investors on Friday, but fears of a deeper correction remain

January 31, 2022

by JustForex

Last week, investors’ attention was focused on the Fed meeting. The Federal Reserve kept the interest rate at 0.25%. It also became known that the end of the QE program will take place in March, and the balance sheet reduction will begin only after the start of the rate hike. This week the main investors’ attention will be focused on the data on the US non-farm payrolls, as it is one of the most important parameters for the Fed’s monetary policy decision. Economists believe the labor market will add 155,000 jobs and show a slowdown from 199,000 in December on the back of the Omicron strain. Traders should pay special attention to the interest rate decision from the Bank of England, the ECB, and the Reserve Bank of Australia. Analysts expect a 0.25% interest rate hike from the Bank of England to curb inflation. Market participants do not expect any changes to the monetary policy of the ECB and the RBA this week. Traders should also pay special attention to inflation data in Europe. Accelerating inflation in the region may provoke the ECB to act more decisively to tighten monetary policy, but analysts forecast lower inflation in the region. Investors should also keep a close eye on the monthly OPEC+ meeting, which has a big impact on oil pricing. Traders should also not forget about the US reporting season. Alphabet, Amazon, Meta Platforms (Facebook), General Motors, Ford, Exxon Mobil, Bristol-Myers Squibb, Merck, and others will report this week.

US stock indices increased significantly on Friday. By the end of the day, Dow Jones (US30) gained 1.65% (+1.92% for the week), S&P 500 (US500) added 2.43% (+1.73% for the week), NASDAQ technology index (US100) jumped by 3.16% and became the leader of growth by the end of the week (+2.56%) among American indices.

The Federal Reserve may raise interest rates immediately by 0.5% points (not 0.25% as previously expected) if inflation remains persistently high, FOMC spokesman Rafael Bostic told the Financial Times.

Qatar Airways has decided to buy 50 Boeing 777X cargo planes. The announcement of the multibillion-dollar deal should coincide with a meeting between Qatar’s Emir Sheikh Tamim bin Hamad Al Thani and US President Joe Biden in Washington on January 31.

Robinhood reported a net loss of $3.7 billion in 2021. The company’s stock has fallen more than 80% since the summer of 2021.

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Possible US sanctions against Russia could cause a “financial panic” and deal a serious blow to the global economy, the New York Times wrote. Analysts believe that restrictive measures against Moscow could be a shock to the economies of developed countries, particularly in Europe, and jeopardize the stability of the global financial system.

On Friday, European stock indexes closed in the red zone, despite positive data on the GDP of major economies. German DAX (DE30) fell by 1.32% (-1.48% for the week), French CAC 40 (FR40) decreased by 0.82% (-1.20% for the week), Spanish IBEX 35 (ES35) lost 1.10% (-0.43% for the week), British FTSE 100 (UK100) decreased by 1.17% on Friday (-0.37% for the week). The French economy added 0.7% in Q4 compared to the previous three months. Analysts, on average, predicted an increase of 0.5%. The GDP of Spain increased by 2% against a growth forecast of 1.4%. German GDP decreased by 0.7% against expectations of decline by 0.3%.

Oil prices rose for the sixth week in a row amid supply concerns as well as geopolitical tension around Ukraine and threats to the United Arab Emirates by Yemeni Hussites. And as long as the situation remains tense, investors should not expect a decrease in oil quotations.

Fitch believes that the impact of the Fed’s rate hike on the Gulf economies will be minimal, as high oil prices will soften the impact.

Gold fell by 2.16%, and silver lost 7.52% over the week. The main drop started just after the Fed meeting on Wednesday last week. Gold and silver are inversely correlated to US government bond yields and the dollar index. The dollar index began to strengthen rapidly amid expectations of interest rate hikes from March, which negatively affected precious metals’ quotations.

Asian markets mostly traded in positive territory on Friday but closed the trading week in a negative area. Japan’s Nikkei 225 (JP225) gained by 2.09% (-2.39% for the week), Australia’s S&P/ASX 200 (AU200) added 2.19% (-3.84% for the week), Hong Kong’s Hang Seng (HK50) decreased by 1.08% (-4.63% for the week). According to a report by IHS Markit, China’s Caixin manufacturing activity index fell to 49.1 points in January from 50.9 points in December. The index fell into negative territory for the fourth time since February 2020 and reached its lowest level in the last two years. Asia’s major stock exchanges will be closed this week (except Australia) due to the holidays.

At the commodities market, futures on natural gas (+17.28%), palladium (+12.84%), corn (+3.25%), Brent (+3.02%) and WTI crude (+2.53%) showed the biggest gains by the end of the week. Futures on lumber (-10.39%), silver (-7.52%), copper (-4.33%), sugar (-3.6%), orange juice (-3.5%), cocoa (-3.11%), platinum (-2.27%) and gold (-2.16%) showed the largest drop.

Main market quotes:

S&P 500 (F) (US500) 4,431.85 +105.34 (+2.43%)

Dow Jones (US30) 34,725.47 +564.69 (+1.65%)

DAX (DE40) 15,318.95 −205.32 (−1.32%)

FTSE 100 (UK100) 7,466.07 −88.24 (−1.17%)

USD Index 97.22 -0.04 (-0.04%)

Important events for today:
  • – Japan Retail Sales at 01:50 (GMT+2);
  • – Japan Industrial Production (m/m) at 01:50 (GMT+2);
  • – Spanish Consumer Price Index (m/m) at 10:00 (GMT+2);
  • – Eurozone GDP (q/q) at 12:00 (GMT+2);
  • – German Consumer Price Index (m/m) at 15:00 (GMT+2);
  • – US Chicago PMI (m/m) at 16:45 (GMT+2);
  • – US FOMC Member George’s Speech at 19:40 (GMT+2).

by JustForex

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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