The Bank of Japan is likely to continue its soft monetary policy this year. Oil continues to decline

February 7, 2023

At Monday’s close, the Dow Jones Index (US30) decreased by 0.38%, and the S&P 500 (US500) was down by 1.04%. Technology Index NASDAQ (US100) fell by 1.00% yesterday. The stock market continues to be influenced by Friday’s news. Atlanta Federal Reserve Bank President Raphael Bostic said Monday that given the unexpectedly strong job growth data in January, the US Federal Reserve might need to raise the cost of borrowing higher. Today, investors are awaiting a speech by US Federal Reserve Chairman Jerome Powell, where they will be looking for clues as to the US Central Bank’s future actions.

The US Treasury Secretary Janet Yellen said Monday that she sees an opportunity to avoid a US recession, with inflation falling significantly and the economy remaining strong given the strength of the US labor market.

Shares of Dell Technologies Inc (DELL) fell by 4.3% yesterday after it reported cutting 6,650 jobs, or about 5% of the global workforce.

Stock markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.84%, French CAC 40 (FR40) fell by 1.34%, Spanish IBEX 35 (ES35) lost 0.72%, and British FTSE 100 (UK100) closed Monday down by 0.82%.

Yesterday ECB officials said with one voice that ECB rate hikes are far from over, despite lower inflation in the region. Policymakers explained that the risk of excessive policy tightening is negligible compared to the risk of doing too little. Analysts forecast a 0.5% rate hike from the ECB at the March meeting.

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The Turkish lira has fallen to an all-time low under pressure from geopolitical risks as several major earthquakes hit the region, causing massive destruction and casualties. According to some reports, more than 4,300 people have died in Turkey and Syria, and more than 20,000 have been injured.

Oil prices rose slightly in choppy trading on Monday. Oil traders are evaluating the prospects of a recovery in demand from China. The International Energy Agency (IEA) expects China to account for half of global oil demand growth this year. However, a sharp increase in US jobs on Friday heightened expectations that the US Federal Reserve will raise rates more than previously planned, which could curb economic growth and reduce the need for fuel.

Asian markets were also down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.24%, China’s FTSE China A50 (CHA50) lost 1.74%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.65%, India’s NIFTY 50 (IND50) fell by 0.31%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.28%.

The Nikkei newspaper reported citing anonymous sources in the government and the ruling party, that deputy governor of the Bank of Japan Masayoshi Amamiya is nominated for the post of the next governor. According to Saxo strategists, Amamiya is considered the most “dovish” of the contenders, dashing hopes that a normalization of Bank of Japan policy could happen soon.

Geopolitical tensions between the US and China have escalated again. The US shot down a Chinese balloon off the coast of South Carolina that had entered US airspace. The US Department of Defense released a statement over the weekend stating that Chinese balloons had entered US airspace three times under the previous administration. This news is likely to affect sentiment as markets were hoping for a quick recovery in demand from the Chinese economy in February.

S&P 500 (F) (US500) 4,111.08 −25.40 (−0.61%)

Dow Jones (US30) 33,891.02 −34.99 (−0.10%)

DAX (DE40) 15,345.91 −130.52 (−0.84%)

FTSE 100 (UK100) 7,836.71 −65.09 (−0.82%)

USD Index 103.62 +0.70 (+0.68%)

Important events for today:

– Australia RBA Interest Rate Decision at 05:30 (GMT+2);
– Australia RBA Rate Statement at 05:30 (GMT+2);
– Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
– German Industrial Production (m/m) at 09:00 (GMT+2);
– US Trade Balance (m/m) at 15:30 (GMT+2);
– Canada Trade Balance (m/m) at 15:30 (GMT+2);
– US Fed Chair Powell Speaks at 19:00 (GMT+2);
– Canada BoC Gov Macklem’s Speech at 19:30 (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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The Bank of Japan is likely to continue its soft monetary policy this year. Oil continues to decline