02 Feb

The US stock indices are showing a strong recovery

February 2, 2022

by JustForex

The US stock indices finished Tuesday’s trading with growth. By the close of the stock market Dow Jones (US30) gained 0.78%, S&P 500 (US500) added 0.69%, and NASDAQ (US100) jumped by 0.75%.

More Federal Reserve officials are leaning toward not expecting a sharp 0.5% rate hike in March. Policymakers plan a 0.25% hike, while the market initially laid out a more hawkish scenario. As a result, the dollar index has been declining for the past three days, while the stock indices show a strong recovery. Analysts’ opinions began to diverge. Some analysts believe that the stock market is still in for a deeper correction this year amid the Fed’s 3 to 5 interest rate hikes, the end of the QE program, and a reduction in the Fed’s balance sheet. Another part of analysts believes that this scenario is already priced in, and a deeper correction is not to be expected.

On Tuesday, PayPal predicted first-quarter 2022 revenue and earnings well below expectations as the company prepares to take a hit from eBay’s continued abandonment of PayPal payment services, sending its shares down 17.4% on the post-market report.

European stock indices mostly rose on Tuesday. Germany’s DAX (DE30) gained 0.9%, France’s CAC 40 (FR40) added 1.5%, Spain’s IBEX 35 (ES35) gained 1.4% and the British FTSE 100 (UK100) added 1.05%. The UK Manufacturing PMI Index showed an increase over last month. The UK economy is showing a recovery. The British pound is rising on the back of a declining dollar index and the expected interest rate hike from the Bank of England at tomorrow’s meeting. The Eurozone will report on inflation today. Analysts expect to see a decline in consumer prices as several European countries (Germany, France, Spain) showed a slowdown in inflation in January.

The central banks of Norway, New Zealand, and the UK have already raised interest rates and plan to raise them again shortly.

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Italy has introduced fines of 100 euros on all persons over 50 years old – both Italian citizens and foreigners residing in the country – who have not received the Covid-19 vaccine.

OPEC+ sees no reason to change its oil production plan, with the alliance predicting a decline in commercial oil reserves until the fall of 2022. Such a policy of OPEC+ will boost oil prices due to low supply levels and amid geopolitical risks between Russia and Ukraine and between the UAE and the Yemeni Hussein.

Asian markets are trading in positive territory on Wednesday. Japan’s Nikkei 225 (JP225) gained 1.68%, and Australia’s S&P/ASX 200 (AU200) added 1.17%.

Bank of Japan Governor Haruhiko Kuroda said on Wednesday that he “can’t agree” with the view that the central bank’s ultra-soft monetary policy has led to the deterioration of regional creditors. The Bank of Japan has come under fire from some lawmakers for the rising costs and reducing returns of its prolonged ultra-soft policy, which has failed to accelerate inflation to its 2% target and reduce the margins commercial banks earn from lending. The blow from the ultra-low rates has hit regional banks particularly hard, which are struggling with an exodus of borrowers to big cities.

The head of Australia’s central bank said on Wednesday that there are economic scenarios in which interest rates could be raised later this year. However, it is also likely that a rate hike may not occur for another year or more. Responding to questions after his speech on the economic outlook, Reserve Bank of Australia (RBA) Governor Philip Lowe stressed that the country has a unique opportunity to reduce the unemployment rate to 4% for the first time in 50 years, and it is worth being patient with policy to achieve that goal.

Main market quotes:

S&P 500 (F) (US500) 4,546.54 +30.99 (+0.69%)

Dow Jones (US30) 35,405.24 +273.38 (+0.78%)

DAX (DE40) 15,619.39 +148.19 (+0.96%)

FTSE 100 (UK100) 7,535.78 +71.41 (0.96%)

USD Index 96.27 −0.27 (−0.28%)

Important events for today:
  • – Australia RBA Governor Lowe’s Speech at 03:30 (GMT+2);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
  • – OPEC+ Meeting at 12:00 (GMT+2);
  • – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
  • – Canada BOC Governor Macklem’s Speech at 22:00 (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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