Positive statistics on the US labor market negatively affected stock indices

by JustForex

US stock indices traded on Friday without a single trend. At the close of the stock exchange on Friday, Dow Jones (US30) decreased by 0.06% (+1.15% for the week), S&P500 (US500) increased by 0.52% (+1.55% for the week), NASDAQ Technology Index (US100) added 1.58%, becoming the highest gainer of the week (+2.07%) among the US indices. All three major indices closed the week in positive territory. Investors evaluated the latest labor market data and corporate reports. Labor market data showed an increase of 467,000 US nonfarm payrolls last month (125,000 – 150,000 forecast). An unexpectedly sharp increase in jobs occurred despite the spread of the new Omicron strain. But the unemployment rate increased from 3.9% to 4.0%. Such data put pressure on the market as it increased investors’ fears that the Fed might become more aggressive.

Analysts believe that the reduction in shipping costs (Baltic Dry Index), stabilization in the commodity markets, and an increase in US retail inventories indicate that inflationary pressures in the US will soon reduce. Typically, the lag between indices is up to six months. Therefore, analysts began to lean toward the option that the Fed will not hike the rates sharply by 0.5% in March and will not make five rate hikes in 2022. The probability of such a scenario is currently 34%. So far, most analysts believe the Fed will raise rates by 0.25% in March and make two more hikes by the end of 2022. This means that there is a high probability of growth of stock indices until spring as the markets initially included a more aggressive scenario in the price. But from spring to late summer, a correction in the stock markets is very likely.

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European stock indices closed Friday in the red zone. German DAX (DE30) decreased by 1.75% (-2.63% for the week), French CAC 40 (FR40) fell by 0.77% (-1.25% for the week), Spanish IBEX 35 (ES35) lost 1.15% (-1.21% for the week), British FTSE 100 (UK100) fell by 0.17% on Friday, but ended the week with +0.67% gain and was the only index that closed in the plus last week. After last week’s ECB meeting on Thursday, Deutsche Bank closed its short EUR trades and advised clients to go long on EUR/USD. Klaas Knot, president of the Dutch Central Bank and a member of the European Central Bank’s Governing Council, said on Sunday that he expects the ECB to raise interest rates in the fourth quarter of this year. He supports cutting the Eurozone central bank’s asset purchase program as quickly as possible. In this case, the ECB must first complete its asset purchase programs, which must be reduced by 20 billion euros ($22.89 billion) per month by the fourth quarter. Industrial production in Germany fell by 0.3% in December. Supply chain problems continue to hurt the German industry.

The energy market began February with high oil prices. On Friday, oil prices added another 2%. The increase in oil prices was caused by factors such as supply shortages and the geopolitical situation in Eastern Europe and the Middle East. Considering that OPEC+ is following its production plan, traders should not expect a decrease in oil prices soon. Some analysts forecast the price of $100 per barrel in the coming months.

Asian markets were mostly trading in positive territory on Friday. Japan Nikkei 225 (JP225) gained 0.73% (+2.81% for the week), Australian S&P/ASX 200 (AU200) added 0.60% (+1.89% for the week), Hang Seng of Hong Kong (HK50) jumped by 3.24% (+0.95% for the week). But on Monday, major Asian indices opened with the decrease. The spread of the Omicron strain in the region has a negative impact on investor sentiment. Bars and restaurants are still banned in large parts of Japan. This week, investors’ attention will be focused on central bank meetings in India, Indonesia, and Thailand. In addition, the reports of some of the largest companies in the region, including Japanese automakers, will be published.

At the commodities market, futures on cocoa (+8.98%), soybeans (+5.88%), WTI oil (+5.87%), heating oil (+5.18%), copper (+4.55%), lumber (+4.39%), Brent oil (+2.77%) and coffee (+2.63%) showed the biggest gains by the end of the week. Orange juice futures (-8.81%), palladium (-3.78%), wheat (-2.67%) and corn (-2.24%) showed the biggest drop.

Main market quotes:

S&P 500 (F) (US500) 4,500.53 +23.09 (+0.52%)

Dow Jones (US30) 35,089.74 -21.42 (-0.061%)

DAX (DE40) 15,099.56 -268.91 (-1.75%)

FTSE 100 (UK100) 7,516.40 -12.44 (-0.17%)

USD Index 95.48 +0.10 (+0.10%)

• – Australia Retail Sales (m/m) at 02:30 (GMT+2);
• – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
• – German Industrial Production (m/m) at 09:00 (GMT+2);
• – ECB President Lagarde’s Speech at 17:45 (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.