28 Dec

Analysts expect growth in the technology sector next year

December 28, 2022

By JustMarkets

The US indices traded yesterday without a single trend. By Tuesday’s stock market close, the Dow Jones Index (US30) increased by 0.11%, while the S&P 500 Index (US500) decreased by  0.40%. The NASDAQ Technology Index (US100) fell by 1.38%.

A Wedbush Securities research report indicated that the decline in tech stocks, including Apple, Amazon, and Microsoft, should turn into a sharp rebound next year as companies think about protecting their profitability and the US Federal Reserve will sooner or later begin to wind down its rate hike campaign. The undeniable fact remains that US inflation is too high. And if the US economy does enter a recession with a Consumer Price Index over 5%, the Fed would be in a quandary because they have little room to stimulate the economy. This would be a scenario that the Federal Reserve would try to avoid, which also helps explain why the Fed is moving forward so aggressively.

Joseph Trevisani, the senior analyst at FXStreet.com, said historical patterns suggest that investors next month are likely to benefit from the recent gains in the euro and yen, which could support the dollar in the short term.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.39% yesterday, France’s CAC 40 (FR40) added 0.70%, Spain’s IBEX 35 index (ES35) closed around opening levels, and Britain’s FTSE 100 (UK100) not trading due to the bank holiday.

European Central Bank President Luis de Guindos believes that the Eurozone is in a very difficult economic situation. Inflation remains high and economic growth in Europe remains low, so the ECB finds itself in a difficult position when it has to raise rates amid the recession, as is happening in the UK at the moment. The main question analysts are asking is whether the ECB can stay hawkish, with inflation above 10%, without hurting the European economy too much. The same can be said for the Bank of England, and that makes the prospect of a weaker euro and sterling an attractive scenario for next year.

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Oil hit a 3-week-high amid loosening COVID-19 restrictions in China, with US production levels down due to the winter storm. About 450,000-500,000 barrels a day of oil were cut over the Christmas weekend in the United States. The weather in the US is predicted to improve this week, which could lead to a slight decline in oil prices.

Russian President Vladimir Putin on Tuesday signed a decree banning the supply of oil and petroleum products to countries participating in the price cap for five months from February 1.

Part of the Asian market did not trade yesterday. Japan’s Nikkei 225 (JP225) gained 0.16%, China’s FTSE China A50 (CHA50) added 0.76%, India’s NIFTY 50 (IND50) increased by 0.65%, Hong Kong’s Hang Seng (HK50) and S&P/ASX 200 (AU200) were not trading due to the bank holiday.

China said it would abolish the COVID-19 quarantine rule for incoming travelers, an important step toward opening its borders even as the number of COVID-19 cases has surged. China will stop requiring incoming travelers to undergo quarantine as of January 8.

Bank of Japan (BOJ) policymakers discussed the growing prospect that higher wages could finally eliminate the risk of a return to deflation. While markets are growing expectations that Japan’s Central Bank is likely to change its policies, investors’ attention is likely to focus on who will lead the BOJ when Governor Haruhiko Kuroda steps down in April. Analysts are confident that a policy review will follow the appointment of a new governor in the second quarter of 2023.

S&P 500 (F) (US500) 3,829.25 −15.57 (−0.40%)

Dow Jones (US30) 33,241.56  +37.63 (+0.11%)

DAX (DE40) 13,995.10 +54.17 (+0.39%)

FTSE 100 (UK100) 7,473.01 0 (0%)

USD Index 104.19 -0.13 (-0.12%)

Important events for today:
  • – Japan Industrial Production (m/m) at 01:50 (GMT+2);

    • – US Pending Home Sales (m/m) at 17:00 (GMT+2).

By JustMarkets

 

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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