23 Jan

Mass layoffs have begun in the United States. The Bank of Japan to continue its soft monetary policy

January 23, 2023

By JustMarkets

At the close of the stock market on Friday, Dow Jones (US30) gained 1.00% (-2.05% for the week), and S&P 500 (US500) increased by 1.89% (+0.30% for the week). The NASDAQ Technology Index (US100) jumped by 2.66% on Friday (+2.15% for the week).

The US government reached its $31.4 trillion borrowing limit on Thursday amid a spat between uncompromising Republicans and Democrats over raising the nation’s debt ceiling. But traders can be sure the politicians will eventually agree because they have no choice. It happens every year, and this time is no exception.

This week, investors will be treated to a wave of reports from major technology companies. Microsoft (MSFT), the second largest US company by market value, reports on Tuesday, followed by Tesla (TSLA) on Wednesday and Intel (INTC) on Thursday. The reporting season started sluggishly. According to Refinitiv, S&P 500 companies are expected to record a 2.9% drop in fourth-quarter earnings overall compared with the previous year.

Alphabet (GOOGL) said Friday that it is cutting about 12,000 jobs or 6% of its workforce. Last week, Microsoft on Wednesday said it would cut 10,000 jobs, while Amazon (AMZN) began notifying employees that it would cut 18,000 jobs. Apparently, the US job market is starting to fall, which will undoubtedly show up in the next labor market reports. For regular people losing their jobs is a serious blow. But for the stock market, it will be a boost as the US Federal Reserve will hold off on raising rates so as not to hurt the economy even more.

Stock markets in Europe were mostly up on Friday. German DAX (DE30) gained 0.76% (-0.52% for the week), French CAC 40 (FR 40) added 0.63% (-0.58% for the week), Spanish IBEX 35 (ES35) jumped by 1.38% (+0.13% for the week), British FTSE 100 (UK100) increased by 0.30% (-0.94% for the week).

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In Canada, a federal government law designed to help the fossil fuel workforce transition to a greener economy has caused unions to be unhappy. The government of Alberta, Canada’s main oil-producing province, says the law will eliminate the oil and gas industry, which accounts for 5% of Canada’s GDP. Canada’s oil and gas sector employs about 185,000 people, and the bill could lead to significant job cuts.

The European Central Bank (ECB) is currently leading the charge against the US Federal Reserve. Last week, support for the euro was largely due to a sell-off in the dollar and a firm stance by ECB President Christine Lagarde on fighting inflation. The ECB head expressed concern that China’s opening will lead to higher energy prices in 2023, and the ECB will continue to raise interest rates to bring inflation down to 2%.

British Finance Minister Jeremy Hunt plans to extend the 5 pence reduction in gasoline prices for another year. On the one hand, this is good news because it will help reduce the cost of gasoline at gas stations. On the other hand, untargeted government spending may keep inflation high for longer, which will only make it harder for the Bank of England, which needs to keep raising rates while the economy is already in recession.

Inflation in Switzerland may have peaked, but it’s too soon to swear off new interest rate hikes, Swiss National Bank President Thomas Jordan said.

Asian markets mostly rose last week. Japan’s Nikkei 225 (JP225) gained 2.77% over the week, China’s FTSE China A50 (CHA50) gained 0.73%, Hong Kong’s Hang Seng (HK50) gained 1.04% over the week, India’s NIFTY 50 (IND50) added 0.16%, and Australia’s S&P/ASX 200 (AU200) was positive 1.69% over the week.

Bank of Japan Governor Haruhiko Kuroda on Friday defended the central bank’s decision to expand its trading range under its yield curve control program and pledged to continue the Bank of Japan’s soft monetary policy. Speaking at the World Economic Forum in Davos, Switzerland, Kuroda said it was “not wrong” for the BOJ’s board to widen its tolerance range for the yield on its 10-year government bond from 25 basis points to 50 basis points last month.

In the commodities market, cotton futures (+5.46%), gasoline (+4.23%), Brent crude oil (+2.79%), and WTI crude oil (+2.29%) showed the biggest gains last week. Futures on natural gas (-8.34%), palladium (-3.21%), cocoa (-2.94%), and platinum (-1.92%) showed the biggest drop.

S&P 500 (F) (US500) 3,972.61 +73.76 (+1.89%)

Dow Jones (US30) 33,375.49 +330.93 (+1.00%)

DAX (DE40) 15,033.56 +113.20 (+0.76%)

FTSE 100 (UK100) 7,770.59 +23.30 (+0.30%)

USD Index 101.99 -0.07 (-0.06%)

Important events for today:
  • – Japan Monetary Policy Meeting Minutes at 01:50 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 19:45 (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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