04 Jan

Gold rises amid the looming recession. Oil falls due to high mortality from COVID-19 in China

January 4, 2023

By JustMarkets

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.04%, and the S&P 500 Index (US500) fell by 0.41%. The Technology Index NASDAQ (US100) lost 0.76% on Tuesday. At the end of the day, all three indices closed with losses.

Apple (AAPL) lost more than 4%, approaching a $2 trillion market value for the first time since 2021. Shares of electric carmaker Tesla Inc (TSLA) fell more than 13% Tuesday after the company reported lower-than-expected deliveries for the quarter and year.

The US stocks ended 2022 with their worst performance since 2008, as interest rates rose throughout the year, putting pressure on once-high growth rates and shares of large tech companies.

In the United States, this week’s focus will be on Friday’s US Nonfarm Payrolls report for December. The jobs report is crucial as the Federal Reserve faces the dilemma of whether to continue tightening monetary policy to bring inflation to desired levels or to abandon aggressive rate hikes to protect the economy from slowing. Higher inflation and rising interest rates have hit the housing sector and could next hit the labor market.

The FOMC minutes will also be released today. Given Powell’s hawkish tone after the last meeting and the general market expectation that the Fed will now level rates, there is speculation that the minutes may be more dovish this time. The market is currently pricing in a final rate below 5.0%, while the Fed is pushing for a final rate above 5.0%.

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Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.80%, France’s CAC 40 (FR40) added 0.44%, Spain’s IBEX 35 (ES35) jumped by 0.42%, Britain’s FTSE 100 (UK100) closed Tuesday in plus 1.37%.

European Central Bank Governing Council spokesman Martins Kazaks expects interest rates to rise significantly in February and March 2023. We are talking about a 0.5% ECB rate hike at each of the meetings. Kazaks, who heads Latvia’s Central Bank, is considered one of the hawkish officials.

Oil starts in 2023 with declining 4%. The US West Texas Intermediate (WTI) crude for February delivery fell by 4.1% to $76.93 a barrel. Brent Crude oil of British origin for delivery in February dropped by 4.4% to $82.10 per barrel. Decreasing activity at factories in China (the biggest oil importer) and IMF warnings about global recession put pressure on oil quotes. The outlook for crude oil remains very uncertain, so high volatility will persist.

Gold showed a strong start in the new year as concerns about an impending recession and a potential slowdown in US interest rates led to increased demand for safe-haven assets other than the dollar.

Asian indices traded flat yesterday. Japan’s Nikkei 225 (JP225) did not trade yesterday, China’s FTSE China A50 (CHA50) fell by 0.69%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.84%, India’s NIFTY 50 (IND50) added 0.19%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday with a minus 1.31%.

China’s repeal of strict antivirus controls last month caused COVID-19 to spread to 1.4 billion people. Funeral companies are reporting a surge in demand for their services, and international health experts are predicting that at least a million people in China will die from COVID-19 this year. But officially, China reports few COVID-19 deaths and downplays concerns about the disease.

S&P 500 (F) (US500) 3,823.95 −15.55 (−0.41%)

Dow Jones (US30) 33,134.79 −12.46 (−0.038%)

DAX (DE40) 14,181.67 +112.41 (+0.80%)

FTSE 100 (UK100) 7,554.09 +102.35 (+1.37%)

USD Index 104.61 +1.09 (+1.05%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • – Switzerland Consumer Price index (m/m) at 09:30 (GMT+2);
  • – French Consumer Price index (m/m) at 09:45 (GMT+2);
  • – Spanish Services PMI (m/m) at 10:00 (GMT+2);
  • – Italian Services PMI (m/m) at 10:45 (GMT+2);
  • – French Services PMI (m/m) at 10:50 (GMT+2);
  • – Germany Services PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
  • – US FOMC minutes at 21:00 (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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