InvestMacro

By George Prior

Comments made Tuesday by the Federal Reserve’s Chair are likely to “kick start a year of important opportunities” for global investors, predicts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The bullish prediction from deVere Group’s Nigel Green comes after Jerome Powell delivered his first remarks after Friday’s “extraordinarily strong” U.S. jobs report which, according to the central bank, shows it has more work to do to tame inflation.

Powell was speaking during a question-and-answer session with David Rubenstein of the Economic Club of Washington.

“We didn’t expect it to be this strong,” he said of the January jobs report, which found that 517,000 jobs had been added to the U.S. economy. “It kind of shows you why we think that this will be a process that takes a significant period of time.”

Of the comments, the deVere CEO says: “Of course, investors hang off every word of the Chair of the central bank of the world’s largest economy.

“So, naturally, when Jerome Powell said ‘the disinflationary process has begun’, markets jumped — despite him also adding notes of caution.

“It would have also not gone noticed by investors that when pushed a little, Powell didn’t use the opportunity to adopt a more hawkish tone.”

After the comments, all major Wall Street indices were trading up. The S&P 500 went up 0.5%, while the Nasdaq Composite gained 0.8%; meanwhile, the Dow Jones was up about 38 points, pushing back on an earlier loss of 186 points.

Nigel Green continues: “We expect that the Fed believing that ‘significant’ declines in inflation will occur this year is likely to kick start a year of important opportunities for global investors.

“2022 was an extremely challenging year for investors, many of whom were caught spectacularly off-guard by not having properly diversified portfolios, which left them open to untold financial risks.

“Looking ahead to the rest of 2023, it is likely that investment headwinds will exceed the tailwinds – thanks to considerably more favourable market conditions driven by inflation peaking and China’s reopening, amongst other factors.

“As we move into an era of peaked inflation, it’s crucial that investors ensure their portfolios are suitably diversified across asset classes, sectors, currencies and regions, so as to make the most of the considerable opportunities that will inevitably present themselves.”

Technology stocks led the gains Tuesday on Powell’s comments.

Last week, as big tech firms posted earnings reports, the deVere chief executive noted: “As market environments shifted in 2022, investors dumped growth stocks, like tech, in favour of value stocks which were deemed more suitable to the challenging landscape,” he observed.

“But what is happening now, we believe, is the beginning of a rebound. Tech stocks are back. Rotation into the right growth stocks will provide strong returns.”

He cited two key reasons why he believes the big tech reports heralded the start of The Great Rotation back to growth stocks.

First, valuations of tech and other growth stocks are currently low, having been hit by the previous rotation into value stocks. Investors are now eyeing these attractive entry points to top up their portfolios as the trend is reversing.

And second, inflation has seemingly peaked, and interest rates are set to stabilise, which takes away a major obstacle for tech stocks.

“Powell’s comments about the disinflationary process having begun will now dominate investors’ mindsets in 2023 as they seek to create and build wealth after a difficult 2022,” concludes Nigel Green.

“They will be positioning their portfolios to take advantage of improving market conditions in order not to miss out on opportunities.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement

By JustMarkets 

The stock market yesterday was tossing from one side to the other, digesting comments of the head of the US Federal Reserve, Jerome Powell. As a result, Mr. Powell did not give any new clues. The Fed still sees the need for further rate hikes in the fight against inflation, which is likely to be protracted. As the stock market closed Tuesday, the Dow Jones index (US30) increased by 0.78%, and the S&P 500 Index (US500) added 1.29%. The NASDAQ Technology Index (US100) jumped by 1.90% yesterday.

According to the Fed’s rate monitoring tool, expectations for a rate hike in March are almost entirely factored into prices, while the probability of a rate hike in May jumped from 38% to 69%. The final rate is expected to be 5.00-5.25% in May, after which the central bank will take a long pause until the end of the year.

Microsoft Corporation (MSFT) and Alphabet Inc (GOOGL) are showing strong growth. An AI arms race has begun between the two technology heavyweights. One day after Google released its chatbot Bard, based on its LaMDA artificial intelligence, Microsoft held an event detailing plans to integrate ChatGPT into its Bing search engine as well as other products.

Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE30) decreased by 0.16%, French CAC 40 (FR40) lost 0.07%, Spanish IBEX 35 (ES35) added 0.06%, and British FTSE 100 (UK100) increased by 0.36% on Tuesday.

The FTSE 100 index is nearing its first test of its recently formed all-time high on BP’s optimistic results. The London-based company posted record earnings of $27.7 billion in 2022, breaking its previous record of $26.2 billion. BP also announced an additional $2.75 billion in shares buybacks and plans to pay a dividend of 6.61 cents. Similarly, Shell, the largest company in the FTSE 100 index, benefited from higher energy prices and earned a record profit of $42 billion last year.

ECB spokeswoman Isabel Schnabel said yesterday that the slowdown in inflation in Europe is not yet due to ECB policy, with core inflation (excluding food and energy prices) remaining extremely high.

Yields on two-year UST (bonds), sensitive to interest rates, are slightly below the level last seen at the end of last year. Gold is inversely correlated to US government bond yields and the dollar index. Against the backdrop of further US Federal Reserve rate hike plans, higher UST yields are expected for a longer period of time, so it will be difficult for gold to regain its recent high levels.

Natural gas futures increased for a second straight day on Tuesday, adding just over 5% thanks to forecasts of cooler temperatures in the coming weeks. But analysts believe this is a temporary bounce and a new bottom is yet to come because storage levels are 9.4% higher than a year ago, and production has reached near-record levels of about 100 billion cubic feet a day, which has significantly weakened the fundamental outlook for gas.

Asian markets also traded without a single trend yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.03% yesterday, China’s FTSE China A50 (CHA50) fell by 0.14%, Hong Kong’s Hang Seng (HK50) ended the day up by 0.36%, India’s NIFTY 50 (IND50) lost 0.24%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.46%.

The Australian dollar rose sharply after the RBA raised its interest rate target to 3.35% from 3.10%. The acceleration in the Consumer Price Index caused some concern among bank officials. The RBA’s accompanying statement said that the board expects that further interest rate increases will be needed in the coming months to ensure that inflation returns to target levels and that this period of high inflation is only temporary. The futures market is starting to lean toward another potential 25 bps hike in March.

S&P 500 (F) (US500) 4,164.00 +52.92 (+1.29%)

Dow Jones (US30) 34,156.69 +265.67 (+0.78%)

DAX (DE40) 15,320.88 −25.03  (−0.16%)

FTSE 100 (UK100) 7,864.71 +28.00 (+0.36%)

USD Index 103.39 −0.23 (−0.22%)

• – US Crude Oil Reserves (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.

By JustMarkets

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.

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%)

• – 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.

By ForexTime 

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

The US stock markets continued their rally yesterday. By Thursday’s close, the Dow Jones Index (US30) decreased by 0.11%, while the S&P 500 (US500) gained 1.48%. The NASDAQ Technology Index (US100) jumped by 3.25%.

Investors are investing in tech stocks after the Meta rally. The artificial intelligence technology boom in recent months has forced investors to pour money into technology. The market has also been helped by renewed confidence that the Federal Reserve will stop raising rates sooner than originally planned.

Tesla (TSLA) added another 3% to its recent rally after it was announced that the company would increase production at its Shanghai plant to nearly 20,000 vehicles per week. Apple’s (AAPL) results for the quarter fell short of estimates due to a drop in iPhone revenue. iPhone’s revenue fell about 8% to $65.78 billion amid a difficult macroeconomic environment and significant supply constraints. Apple stock fell by 3% after the report was released. Alphabet (GOOGL) reported lower-than-expected fourth-quarter earnings and revenue as lower spending on online advertising affected results. The company also said its first-quarter results would reflect lower spending related to job cuts. Shares of Alphabet Inc. fell more than 1% on the report. Amazon (AMZN) was also unhappy with the results.

Operating profits continued to fall in the current quarter. Faced with high inflation and a volatile economy, the company has set its sights on cutting costs across various businesses. Shares fell 5% after the market closed. Ford Motor Co (F) said Thursday that fourth-quarter profit fell from a year earlier. The automaker blamed supply chain problems and production “instability, ” leading to higher costs and lower volumes. Ford shares fell more than 6% on the report after the close of the main session.

Stock markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 2.16%, France’s CAC 40 (FR40) added 1.26%, Spain’s IBEX 35 index (ES35) jumped by 1.45%, and Britain’s FTSE 100 (UK100) closed Thursday up by 0.76%.

The ECB, as expected, raised its interest rate by 0.5% yesterday. The US Fed is ending its rate hike cycle and will soon talk about ending quantitative easing (QT), with the ECB about halfway through and planning to start QT in March. This situation is good for the euro as the spread between the euro, and the dollar will continue to narrow.

The Bank of England announced another “sharp” interest rate hike on Thursday, saying it was too early to declare victory over inflation. The bank raised its key rate from 3.5% to 4%. Nevertheless, the bank tempered expectations of further rate hikes, dismissing suggestions that it would respond “strongly” to price pressures and implying that future changes would be smaller.

Oil prices fell Thursday as US factory orders fell and the dollar strengthened, making oil more expensive for non-US buyers. This indicates a further slowdown in the economy, especially in manufacturing, which is negatively affecting oil. Investors have become less confident about the strength of the oil outlook. But analysts are still confident in a bullish scenario for the “black gold” due to the rebounding economy of China (the largest oil importer). It is also worth remembering that the ban on Russian oil will come into effect on February 5, which may strike a blow to global supplies.

The unusually warm start to the winter of 2022/23 resulted in a significant reduction in heating demand in the United States and Europe compared to the norm, leaving more gas in storage than originally anticipated. This has led to a drop in natural gas prices over the past two months. But the situation may change dramatically with the onset of cold weather, which weather forecasters predict for the second half of February.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.20%, China’s FTSE China A50 (CHA50) decreased by 0.34%, Hong Kong’s Hang Sengv(HK50) lost 0.52%, India’s NIFTY 50 (IND50) fell by 0.03%, and Australia’s S&P/ASX 200 (AU200) was up by 0.13% on the day.

The mixed economic data released reinforced concerns about China’s rapid recovery after the repeal of the zero COVID-19 policy. While the country’s services sector recovered sharply in January after a four-month slump, a private survey showed that small-scale manufacturing firms still struggle with rising COVID-19 cases and lingering supply chain problems.

Severe flooding in New Zealand’s largest city, Auckland, has increased inflationary pressures and is creating a new cost-of-living headache for Prime Minister Chris Hipkins, who is trying to win back support for his party before the election.

S&P 500 (F) (US500) 4,179.76 +60.55 (+1.47%)

Dow Jones (US30) 34,053.94 −39.02 (−0.11%)

DAX (DE40) 15,509.19 +328.45 (+2.16%)

FTSE 100 (UK100) 7,820.16 +59.05 (+0.76%)

USD Index 101.74 +0.53 (+0.53%)

• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• – Eurozone Producer Price Index (m/m) at 12:00 (GMT+2);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• – US Unemployment Rate (m/m) at 15:30 (GMT+2);
• – US ISM Services PMI (m/m) at 17:00 (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.

By William Chittenden, Texas State University 

The Federal Reserve’s policy-setting committee lifted interest rates on Feb. 1, 2023, by a quarter of a percentage point to a range of 4.5% to 4.75%. The increase, the smallest since the Fed began an aggressive campaign of rate hikes in March 2022, came amid signs the fastest pace of inflation in decades is cooling. But the Fed also indicated more rate hikes are coming.

So why is the Fed slowing the size of rate increases now, and what does it mean for consumers? We asked finance scholar William Chittenden from Texas State University to explain what’s going on and what comes next.

Why did the Fed raise rates by only a quarter point?

The Fed is trying to figure out whether last year’s rate hikes have slowed the economy enough to get inflation near its target of about 2%.

By raising what’s known as the Fed funds rate, the U.S. central bank makes borrowing more expensive, which means buying large-ticket items, like cars and homes, is more costly. This should lead to fewer people buying cars, which will likely result in lower car prices.

In 2022, the Fed lifted rates eight times by a total of 4.25 percentage points, which helped prompt inflation to drop to an annual pace of 6.5% in December from 9.1% at its peak in June.

To understand why it’s so hard for the Fed to figure out if its rate hikes worked, think of the economy as a fully loaded oil tanker out in the ocean. Naturally, it’s chugging along as fast it can to reach a specific destination, but it takes a long time from the captain “stepping on the brakes” to when the ship actually stops moving forward.

Similarly, the Fed is raising rates to slow the economy – sort of like stepping on the brakes – and bring inflation down to 2%, but there’s often a long delay between the hikes and their impact on the economy.

But if the Fed eases off the brakes too early, inflation could remain high. If it presses on them too hard, unemployment will likely shoot up and the economy will slide into a recession. By increasing interest rates only a quarter-point, the Fed is signaling that it believes the economy has begun to slow down and is on a path to 2% inflation.

Does this mean borrowing costs will start coming down?

The Fed funds rate acts as a base rate for shorter-term interest rates, such as for car loans and credit cards. As it goes up, short-term borrowing rates increase by about the same amount.

The financial markets are predicting about an 80% chance the Fed’s benchmark lending rate will top out around 5% this summer – which means they’re expecting rates to go just a little bit higher.

Rates on shorter-term borrowing are unlikely to come down, but if markets are right, they probably won’t increase much more.

However, for long-term borrowing costs, as on a 30-year mortgage, rates are already coming down and are likely to fall some more – good news for homebuyers.

How about inflation – can consumers expect prices to start falling?

Overall, yes, inflation is already starting to come down – and prices on some items are even falling.

For example, used-car prices, which soared earlier in the COVID-19 pandemic, have dropped in recent months, while prices of dozens of other items, such as flour, clothes and gasoline, have eased.

However, some costs continue to increase. Egg prices soared after the supply was disrupted because of avian flu, which killed off nearly 53 million egg-laying hens. Unfortunately, increasing interest rates will not bring back those birds or help decrease the cost of eggs.

In addition, nothing the Fed does will affect the war in Ukraine, which has led to higher world wheat and energy prices.

The point being, the Fed can’t really address certain types of inflation.

Does all this mean the U.S. will avoid recession?

That’s the trillion-dollar question.

Fed officials have at times sounded hopeful that they can bring down inflation without crashing the economy – a so-called soft landing. During his press conference after the latest announcement Feb. 1, 2023, Fed Chair Jerome Powell was more cautious, saying it’s too soon to declare victory. But he noted: “We can now say for the first time that the disinflationary process has started.”

Economic forecasters have been less confident that the U.S. will avoid a recession. On average, economists surveyed this past month by The Wall Street Journal forecast a 61% probability of a recession in 2023. In addition, key economic indicators point to a recession, while the yield curve – a bond market metric that has been successful at predicting recessions – currently puts the odds at about 47%.

In my view, this all adds up to: Nobody really knows. My best advice to consumers out there is to prepare financially for a recession, but let’s not give up hope that the Fed can slow the economy without crashing it.

About the Author:

William Chittenden, Associate Professor of Finance, Texas State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By JustMarkets

The US stock markets rose yesterday amid a slowdown in the rate hike. At the close of the stock market on Wednesday, the Dow Jones Index (US30) gained 0.02%, and the S&P 500 Index (US500) added 1.05%. The NASDAQ Technology Index (US100) jumped by 2.00% yesterday.

The Federal Reserve raised its interest rate by 0.25% on Wednesday but indicated that it expects more hikes in the future. The Fed is planning two more 0.25% rate hikes in March and May, but analysts doubt the Fed needs to go that high, especially since inflation is slowing and there are early warning signs in the labor market. But investors were generally encouraged by Powell’s answers to questions during his press conference about easing financial conditions, such as the rebound in stocks and falling bond yields in recent months. That pushed stock indices higher.

Meta Platforms stock jumped by 17% thanks to fourth-quarter revenue outperformance. Revenue was $32.17 billion, better than the consensus forecast of $31.53 billion. Facebook reached the milestone of 2 billion daily active users. Major tech companies like Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) report today. Volatility in the stock market will be high, especially during the reporting period.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.35%, French CAC 40 (FR40) decreased by 0.08%, Spanish IBEX 35 (ES35) added 0.74%, British FTSE 100 (UK100) closed on Wednesday down by 0.14%.

The ECB and the Bank of England will hold their monetary policy meetings today. In both cases, an interest rate hike of 0.5% is expected. This may give confidence to the euro and the British pound amid a narrowing interest rate differential with the US Fed. With the British economy already projected to fall into recession in 2023, Governor Andrew Bailey and his colleagues should assess how much of a delayed negative impact a further series of rate hikes will have. Public employee strikes have heightened the sense of despair in the economy.

Gold reached the $1,950 mark as the dollar fell because the US Federal Reserve nears the end of its tightening cycle. Gold has an inverse correlation to the dollar index and government bond yields.

The US crude oil inventories hit a 20-month-high. With OPEC+ countries deciding to leave production levels unchanged in the expectation that Chinese demand will pick up, oil prices fell more than 3% yesterday. But the long-term outlook for oil remains bullish.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.07%, China’s FTSE China A50 (CHA50) jumped by 0.66%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.05%, India’s NIFTY 50 (IND50) decreased by 0.26%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.33%.

Bank of Japan spokesman Wakatabe said yesterday that the Bank of Japan’s resolve to continue monetary policy easing has not changed. But investors should understand that the Bank of Japan is likely to start the process of monetary policy normalization this year after the change of BoJ governor. Although some analysts believe that Japan’s central bank is unlikely to tighten monetary policy until deflation is defeated and the Ministry of Finance stops relying on ultra-low yields to control the cost of government debt. And that could take a much longer time.

S&P 500 (F) (US500) 4,119.21 +42.61 (+1.05%)

Dow Jones (US30) 34,092.96 +6.92 (+0.020%)

DAX (DE40) 15,180.74 +52.47 (+0.35%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.14%)

USD Index 102.06 −0.22 (−0.21%)

• – UK BoE Inflation Report at 14:00 (GMT+2);
• – UK BoE Interest Rate Decision at 14:00 (GMT+2);
• – UK BoE Monetary Policy Statement at 14:00 (GMT+2);
• – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
• – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – Eurozone ECB Press Conference at 15:45 (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.

By JustMarkets

The US stock markets rose yesterday. At the close of the stock market on Tuesday, the Dow Jones Index (US30) gained 1.09%, and the S&P 500 Index (US500) added 1.46%. NASDAQ Technology Index (US100) jumped by 1.67%. Investors have been evaluating a lot of companies’ results, and they have generally been better than expected. But US economic indicators continue to decline. Consumer confidence fell from 109 to 107.1 in January, with the report indicating that consumers have become less optimistic about job prospects and expect a softening of business conditions in the near future.

General Motors (GM) shares rose more than 7% after its fourth-quarter results beat Wall Street estimates, and the automaker’s annual outlook was less bad than feared. Caterpillar (CAT) shares fell more than 3% after the heavy equipment maker’s fourth-quarter earnings missed Wall Street estimates. PayPal (PYPL) announced plans to lay off 2,000 employees, about 7% of its workforce, as the payments company prepares for a “challenging macroeconomic environment.”

Investors await further results from the big tech companies. Meta Platforms (META) will report as early as today. And on Thursday, Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) will report.

The US Federal Reserve will hold an important monetary policy meeting today. The Fed is likely to raise the rate by 0.25%, and that increase is already in prices. Therefore, investors’ main focus will be on Fed Chairman Jerome Powell’s speech 30 minutes after the rate release. Investors will be looking for clues as to the Fed’s next move — whether the Fed will continue to raise rates or this hike will mark the end of the tightening cycle, after which the central bank will take a long pause.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.01%, French CAC 40 (FR40) closed on the opening level, Spanish IBEX 35 (ES35) decreased by 0.19%, and British FTSE 100 (UK100) closed on Tuesday down by 0.17%.

Despite the energy crisis and the ensuing inflationary crisis, the eurozone economy once again showed resilience. Eurozone GDP grew by 0.1% in the last quarter. But most economies are now in stagnation with near zero growth. Germany and Italy, as the major industrialized countries, have seen small declines as they are hit the hardest by the energy crisis, while France and Spain have managed to achieve small growth rates. Despite the small increase, the growth momentum is downward, and the next quarter is likely to show a contraction.

The British Retail Consortium said that store price inflation accelerated to 8%, the highest since  2005. Prices for consumers have been rising steadily, even as the broader UK inflation rate is beginning to decline. Higher food prices mean that consumers are spending less on secondary goods.

The United States has expanded its sanctions list against Iranian entities that Washington accuses of being involved in supplying drones to Russia.

Natural gas prices continue to fall and have reached a 21-month low. The drop in gas prices came after an unusually warm start to the winter of 2022/23, which led to a drop in demand for heating fuel. But significantly colder temperatures are forecast for the region ahead, which will lead to increased consumption. In turn, increased consumption (demand growth) will put upward pressure on the quotes.

A weaker dollar and increased demand for crude oil and refined products, as reported late by the EIA or Energy Information Administration, supported oil prices yesterday. There will also be an OPEC+ meeting today where production quotas for the next two months will be approved. No surprises are expected, and production is projected to remain on target. However, volatility in oil will be elevated amid the release of strategic reserves data.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.39%, China’s FTSE China A50 (CHA50) lost 1.27%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.03%, India’s NIFTY 50 (IND50) gained 0.07%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.07%.

Factory activity in Japan has been decreasing for the third month in a row. Amid worsening global economic conditions, Japanese companies are facing calls for higher wage increases to counter inflation and support the recovery of the world’s third-largest economy.

New Zealand’s labor market is starting to show signs of slowing. The unemployment rate rose from 3.3% to 3.4%, with quarterly job growth falling short of forecasts. Against this backdrop, the central bank may slow the pace of interest rate hikes.

S&P 500 (F) (US500) 4,076.60 +58.83 (+1.46%)

Dow Jones (US30) 34,086.04 +368.95 (+1.09%)

DAX (DE40) 15,128.27 +2.19 (+0.014%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.17%)

USD Index 102.06 −0.22 (−0.21%)

• – Japan Manufacturing PMI (m/m) at 02:00 (GMT+2);
• – Spanish Manufacturing PMI (m/m) at 10:15 (GMT+2);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – Italian Manufacturing PMI (m/m) at 10:45 (GMT+2);
• – French Manufacturing PMI (m/m) at 10:50 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00  (GMT+2);
• – OPEC+ Meeting at 13:00 (GMT+2);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – US FOMC Statement at 21:00 (GMT+2);
• – US Fed Interest Rate Decision at 21:00 (GMT+2);
• – US FOMC Press Conference at 21:30 (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.