Today investors’ attention will be focused on the Fed’s interest rate decision, as well as Fed Chief Jerome Powell’s speech

January 26, 2022

Yesterday, the US stock indices rebounded from session lows ahead of the Fed meeting but closed the trading day with losses. The Dow Jones index (US30) decreased by 0.19%, the S&P 500 index (US500) decreased by 1.22%, and the NASDAQ technology index (US100) lost 2.28% at the close of the stock market.

Geopolitical tensions have increased investor uncertainty, with NATO putting troops on alert and the US on high alert in response to the Russian build-up along the Ukrainian border. These tensions have caused crude oil prices to rise because of concerns about supply cuts, which in turn has given energy companies a significant boost.

The US administration is assembling a coalition of major gas suppliers that could compensate European countries for the possible failure of pumping from Gazprom in a crisis scenario with the outbreak of hostilities and the imposition of sanctions. The US officials are in talks with Qatar, the world’s largest LNG producer, to provide Europeans with a “safety cushion” in case of gas shortages.

Deutsche Bank AG is betting that policy divergences between the Federal Reserve and the People’s Bank of China will lead to a further correction of US stocks, while Chinese companies will get an upward impulse.

Today, market participants will closely watch the speech of Fed Chief Jerome Powell to get clarity on the timing of the central bank’s key interest rate hike to fight inflation. Analysts expect Jerome Powell to announce an interest rate hike in March and the end of the QE program in February. If the tightening is sharper, the markets could see a sharp rise in the dollar index. Conversely, if tightening is softer, the dollar index will see a decline, while stock indices could get a boost.

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The fourth-quarter reporting season continues, with 79 companies in the S&P 500 already reporting. According to Refinitiv, 81% of them reported better-than-expected results.

J&J expects Covid vaccine sales to be up to $3.5 billion this year even though the drugmaker is facing production problems and uneven demand for the vaccine.

Delta Air Lines has been upgraded to a “buy” rating from a “hold” rating; the target price is $50, according to new projections from Berenberg. Analysts are seeing a better value proposition at US airlines compared to European airlines. The US airline demand is recovering at a faster pace.

European stock markets increased in yesterday’s trading after Monday’s big drop. Germany’s DAX (DE30) gained 0.75%, France’s CAC 40 (FR40) added 0.7%, Spain’s IBEX 35 (ES35) increased by 0.7% and the British FTSE 100 (UK100) jumped by 1.02%. The ECB balance sheet continues to rise. The ECB continues to actively stimulate the region’s economy. Total assets grew by another €6.4bn. The ECB balance sheet now equals 82% of Eurozone GDP against 38.2% of the Fed and 134.5% of the Bank of Japan.

The crude oil rally resumed as worries about a potential military conflict between Russia and Ukraine helped keep oil prices higher despite upcoming weekly US data that could show another increase in inventories. Oil producers in the OPEC+ alliance also cut production over the past month.

Asia-Pacific (APAC) stock markets are mostly decreasing in Wednesday trading. Japan’s Nikkei 225 (JP225) decreased by 0.44% from the opening, Hong Kong’s Hang Seng (HK50) decreased by 0.02%. It’s a bank holiday in Australia today. Volatility in Asian markets is now below average as investors remain cautious ahead of the Fed meeting and as the “fear index” has reached its lowest level since March 2020.

Main market quotes:

S&P 500 (F) (US500) 4,356.46 −53.67 (−1.22%)

Dow Jones (US30) 34,297.67 −66.83 (−0.19%)

DAX (DE40) 15,123.87 +112.74 (+0.75%)

FTSE 100 (UK100) 7,371.46 +74.31 (+1.02%)

USD Index 96.00 +0.08 (+0.08%)

Important events for today:

– Canada BoC Interest Rate Decision at 17:00 (GMT+2);
– Canada BoC Monetary Policy Report at 17:00 (GMT+2);
– US New Home Sales (m/m) at 17:00 (GMT+2);
– US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
– Canada BoC Press Conference at 18:00 (GMT+2);
– US FOMC Interest Rate Decision at 21:00 (GMT+2);
– US FOMC Statement at 21:00 (GMT+2);
– US FOMC Press Conference at 21:30 (GMT+2);
– New Zealand Consumer Price Index (m/m) at 23:45 (GMT+2).

by JustForex

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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Today investors’ attention will be focused on the Fed’s interest rate decision, as well as Fed Chief Jerome Powell’s speech