25 Jan

Corporative reporting supports US stock indices. The People Bank of China (PBoC) intends to stimulate the economy

January 25, 2024

By JustMarkets

As of Wednesday’s stock market close, the Dow Jones Index (US30) decreased by 0.26%, while the S&P 500 Index (US500) added 0.08%. The NASDAQ Technology Index (US100) closed positive by 0.36%. Optimism about the US economic outlook and strong corporate earnings results boosted stock prices on Wednesday.

Strong earnings from technology companies supported the broader market, as Netflix (NFLX) closed higher by more than 10% after reporting fourth-quarter streaming pay-per-view numbers well above consensus. Additionally, shares of ASML Holding NV rose more than 8% and led gains in chip stocks after reporting record Q4 orders, indicating the strength of the semiconductor industry.

S&P’s US manufacturing PMI for January unexpectedly rose by 2.4 to 50.3, beating expectations for a decline to 47.6 and showing the fastest pace of growth in 15 months.

On Wednesday, the Bank of Canada (BoC) left its key overnight rate at 5% and said that while core inflation is still a concern, the bank is focusing on when to lower borrowing costs rather than whether to raise rates again. Bank of Canada Governor Maclem said at a press conference that the Bank of Canada is not yet ready, willing, or able to go soft on interest rates but hinted that a rate cut is around the corner.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 1.58%, France’s CAC 40 (FR40) gained 0.91% yesterday, Spain’s IBEX 35 (ES35) added 1.16%, and the UK’s FTSE 100 (UK100) closed positive by 0.56%.

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The Eurozone Manufacturing PMI for January rose by 2.2 to a 10-month high of 46.6, which was stronger than expectations of 44.7.

Today, the ECB will hold its first monetary policy meeting of the year on Thursday. There is no chance of a policy change at this meeting, but ECB President Lagarde’s press conference at 15:45 will play an important role in shaping expectations going forward. The ECB now depends on incoming data on inflation, production, GDP, and the labor market. And Lagarde is likely to talk about it at the press conference. The currency market is unlikely to react strongly to the ECB statement unless Lagarde specifies the timing of the rate cut. If there are clear signals about the timing of the rate cut, it could lead to a strong price imbalance.

WTI crude oil prices strengthened above $75 a barrel on Thursday, hovering near one-month highs, as a significant drawdown in US crude inventories helped boost oil prices. Official data showed US crude inventories fell by 9.233 million barrels last week, the biggest decline since August and beating market expectations for a 2.15 million barrel drop. Fresh stimulus measures in China, the largest oil importer, also contributed to the bullish sentiment, with the People’s Bank of China announcing that it will lower the reserve requirement ratio for banks next month in an attempt to support the country’s struggling economy. In addition, geopolitical tensions persisted as a coalition led by the US and UK strikes Houthi militants in Yemen, who are responsible for numerous attacks on commercial ships in the Red Sea.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.80%, China’s FTSE China A50 (CHA50) jumped by 1.28%, Hong Kong’s Hang Seng (HK50) was up by 3.56% by Wednesday’s close, and Australia’s ASX 200 (AU200) was positive by 0.06%.

On Wednesday, the People’s Bank of China (PBOC) cut the reserve requirement ratio for banks by 50 bps to 10.00%, which will boost liquidity and help revive the Chinese economy, which is favorable for global growth prospects. PBOC also noted that more measures will be taken soon to stimulate economic growth. These signals helped Chinese markets bounce off multi-year lows.

Singapore’s central bank (MAS) is expected to leave its monetary policy unchanged this month on January 29 and refrain from easing sentiment until it has more evidence that inflation is falling consistently. Inflation in Asia’s financial center remains stable. It was 3.2% in November and 3.3% in December, down from a peak of 5.5% in early 2023.

S&P 500 (US500) 4,868.55 +3.95 (+0.08%)

Dow Jones (US30) 37,806.39 −99.06 (−0.26%)

DAX (DE40) 16,889.92 +262.83 (+1.58%)

FTSE 100 (UK100) 7,527.67 +41.94 (+0.56%)

USD Index  103.31 −0.31 (−0.30%)

News feed for 2024.01.25:
  • – German Ifo Business Climate (m/m) at 11:00 (GMT+2);
  • – Norwegian Norges Interest Rate Decision at 11:00 (GMT+2);
  • – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
  • – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
  • – US Building Permits (m/m) at 15:30 (GMT+2);
  • – US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
  • – US GDP (q/q) at 15:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – Eurozone ECB Press Conference at 15:45 (GMT+2);
  • – US New Home Sales (m/m) at 17:00 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (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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