10 Jan

The focus today is on the banking symposium. Inflation in Tokyo set another record

January 10, 2023

By JustMarkets

The US indices traded yesterday without a single trend. Dips in healthcare and energy stocks offset gains in the high-tech sector. At the close of trading yesterday, the Dow Jones index (US30) decreased by 0.34%, while the S&P500 index (US500) lost 0.08%. The NASDAQ Technology Index (US100) gained 0.63% on Monday.

Goldman Sachs analysts believe the US economy will be more resilient to monetary tightening than other G10 economies, as not only a strong labor market but also a housing finance structure and energy self-sufficiency will help. Unlike Europe, most US households have fixed-rate mortgages that are locked in at historically low levels and are not subject to Fed rate hikes.

Neuberger’s experts believe that now is a great opportunity to buy Tesla (TSLA) stock. According to analysts, the electric carmaker’s business model remains strong, and current price levels are attractive.

The heads of the central banks of the United States, Canada, and Japan will speak at a banking symposium in Sweden today. Markets will be watching for any changes to the Fed chairman’s hawkish rhetoric, especially amid growing signs of declining inflation in the US.

At the end of this week, the US earning season begins. As usual, the season will start with the banking sector. US banking giants are forecast to report lower profits and lower next quarter forecasts.

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Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 1.25%, French CAC 40 (FR40) added 0.68%, Spanish IBEX 35 (ES35) lost 0.07%, and British FTSE 100 (UK100) closed on Monday with a 0.33% gain.

Geopolitics in Europe and energy prices are likely to continue to be the focus of investors’ attention. In early 2023, Europe’s energy outlook seems more hopeful. Gas reserves in Germany are back above 90%, and Europe as a whole is at 83%. The milder weather has led to a drop in demand.

After surging prices for most of 2022 due to weather-related disruptions and supply reductions caused by political and other disruptions in Russian gas production following the invasion of Ukraine, natural gas futures suddenly collapsed in December 2022. The market reversal was caused by unusually high winter temperatures last month. But on Monday, natural gas prices rose more than 5% as the forecast for the coming week points to lower temperatures that will increase consumption. Long-term forecasts from the European (ECMWF) weather forecast model version 2 (CFSv2) hint at another potentially cold period of weather that will occur from late January into February. If this forecast materializes, it could result in the withdrawal of more than 200 BСF or more in the coming weeks.

Oil traders are betting China’s economic recovery from tough COVID policies will boost oil consumption. With current production, increased demand will drive oil prices higher. Oil fell more than 8% last week, the most significant weekly decline in months. Oil rebounded on Monday after China fully reopened its borders to international trade. Oil demand in China usually rises every year after the Lunar New Year, which this year falls at the end of January.

Asian markets rose steadily yesterday. Japan’s Nikkei 225 (JP225) gained 0.59%, China’s FTSE China A50 (CHA50) added 0.97%, Hong Kong’s Hang Seng (HK50) jumped by 1.89%, India’s NIFTY 50 (IND50) increased by 1.35%, and Australia’s S&P/ASX 200 (AU200) ended the day up 0.59%.

According to bank analysts, Japan’s GDP growth will slow in 2023 from 1.2% to 1.0% but remain above its potential level, helped by a favorable macroeconomic environment. A stronger yen and softer border controls will likely improve trade conditions, and a fiscal stimulus program will support the recovery. Nationwide inflation in Japan has not yet peaked and is likely to reach 4.0% in early 2023, but will soon slow to 2% in the second quarter. Inflation in Tokyo has reached 4%, indicating a stronger-than-expected trend in consumer prices. This is the highest value since 1982. The largest contributors to the price increase were food and energy. Inflation in Tokyo is a leading indicator of the national CPI, and its higher rate suggests that national price growth is also likely to accelerate in December. This factor could further fuel rumors that the Bank of Japan will begin to adjust its monetary policy.

S&P 500 (F) (US500) 3,892.09 −2.99 (−0.077%)

Dow Jones (US30) 33,517.65 −112.96 (−0.34%)

DAX (DE40) 14,792.83 +182.81 (+1.25%)

FTSE 100 (UK100) 7,724.94 +25.45 (+0.33%)

USD Index 103.17 -0.71 (-0.68%)

Important events for today:
  • – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
  • – Canada BoC Gov Macklem Speaks at 12:10 (GMT+2);
  • – Japan BOJ Gov Kuroda Speaks at 12:10 (GMT+2);
  • – US Fed Chair Powell Speaks at 16:00 (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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