Are markets getting risks right?

Are markets getting risks right?

Corporate Earnings News
Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates

Corporate Earnings News

Corporate earning calendar 25 January - 1 February 2024

Thursday: Blackstone, Intel Corp, Celanese Corp., T-Mobile US, Comcast, Union Pacific, Western Digital, Marsh & McLennan, Sherwin-Williams, Northrop Grumman, Capital One Financial Corporation, Valero Energy, Xcel Energy, Fair Isaac Corporation, McCormick & Co.
Friday: American Express, NextEra Energy, Colgate-Palmolive
Tuesday: Microsoft, General Motors, Pfizer, Advanced Micro Devices, Amgen, Caterpillar, Mondelez, Snap Inc.
Wednesday: ADP, Boeing, Mastercard, Novo Nordisk, Qualcomm, Thermo Fisher Scientific
Thursday: Alphabet, Amazon, Apple, Meta Platforms, Ball Corp., Gilead Sciences, Merck & Co., MicroStrategy, Starbucks, Takeda Pharmaceutical

According to LSEG I/BE/S data, the 23Q4 Y/Y blended earnings growth estimate is 4.5%. If the energy sector is excluded, the growth rate for the index is 8.2%. Of the 82 companies in the S&P 500 that have reported earnings by 24 January for 23Q4, 80.5% reported above analyst expectations. This compares to a long-term average of 66%. The 23Q4 Y/Y blended revenue growth estimate is 2.6%. If the energy sector is excluded, the growth rate for the index is 3.9%.

US Stock Indices

Nasdaq 100 +3.94% MTD
Dow Jones Industrial Average +0.57% MTD 
NYSE -0.50% MTD 
S&P 500 +1.69% MTD 

The S&P 500 reached its fourth straight record close on Wednesday as chipmakers continued to benefit from optimism around AI. Microsoft hit an all-time high, with its market value rising above $3 trillion for the first time. It is the only stock besides Apple to reach $3 trillion.

US stocks 

Mega caps: A generally good week for the “magnificent seven” mega caps as investors remained optimistic about AI. Apple, Alphabet, Amazon, Meta Platforms, Nvidia and Microsoft are all up. However, Tesla was down this week. It reported a fall in fourth quarter gross margin after the market closed and warned of "notably lower" vehicle sales growth this year. Revenue rose 3% to $25.2bn, marking its slowest pace of growth in more than three years and coming in below analyst expectations of $25.6bn.

Energy stocks had a good week this week despite US military bombing against the Iranian-backed Houthis continuing. Occidental Petroleum, Apa Corp (US), ConocoPhillips, Shell, Chevron, ExxonMobil, Marathon Petroleum, and Phillips 66 are all up this week. Halliburton is up this week after it beat quarterly profit expectations, helped by strength in its drilling and evaluation business. The company's international revenues were boosted by improved activity in the Middle East. The company said it returned $1.4 billion of cash to shareholders in 2023 through stock repurchases and dividends, which represents over 60% of its free cash flow, and plans to return over 50% in 2024. Baker Hughes is down this week despite reporting higher-than-expected profit growth for the final quarter of last year. It missed its revenue expectations by $85 million. Energy Fuels is also down this week despite its shares having seen, according to Yahoo finance, an increase of about 10.06% over the last month.

Materials and Mining stocks had a mixed week due to the slowing growth in physical consumption of nonferrous metals and further signs of further economic slowing in Europe and China limiting price rallies. Copper prices reached a three-week high before coming down early on Thursday in Asia following a rate cut in top consumer China. Yara International, Sibanye Stillwater, Nucor Corporation, CF Industries Holdings, and Albemarle are up this week. Freeport-McMoRan is also up after forecasting 2024 copper and gold sales to be level with or growing slightly from 2023 levels, as demand for both industrial and precious metals remains high. Newmont Mining and Mosaic are down this week.

European Stock Indices

Stoxx 600 -0.40% MTD
DAX +0.83% MTD
CAC 40 -1.16% MTD
IBEX 35 -1.27% MTD
FTSE MIB -0.04% MTD
FTSE 100 -2.66% MTD

Other Global Stock Indices 

MSCI World Index +0.06% MTD
Hang Seng -6.73% MTD 

Currencies

The US dollar continues to strengthen, benefitting from US economic resilience and its status as a safe haven in times of rising geopolitical risk. The GBP is -0.06% MTD against the USD and remains one of the best performing G10 currencies. Sterling rose on Wednesday following the release of the S&P Global/CIPS flash composite PMI, which indicated that business activity picked up from December. The EUR is -1.38% MTD against the USD. The eurozone economy continues to be anaemic with business activity still in contractionary territory according to the January flash composite PMI. In addition, its largest economy, Germany, is experiencing further falls in its manufacturing sector and business confidence is declining, posing a challenge for the ECB, which is looking to balance growth while controlling inflation.

Cryptocurrencies

Bitcoin -5.00% MTD
Ethereum -2.85% MTD

Bitcoin continued to fall this week, dipping below $40,000 for the first time this year on Monday, following on from the approval of spot Bitcoin exchange-traded funds (ETFs) in the US on 10 January. The drop appears to be largely due to exits from Grayscale’s GBTC. 

Fixed Income

US 10-year yield to 4.17%.
German 10-year yield to 2.34%.
UK 10-year yield to 4.01%.

Yields rebounded this week as investors demanded a higher risk premium as the possible path ahead for rate cuts were pushed further into the spring and early summer. US treasuries rose following a strong reading of US business activity, with the composite PMI up to again in January. Yields shot higher on Wednesday after the Treasury Department sold $61 billion of five-year notes at auction. 

Note: As of 4 pm EST 24 January 2024

Commodities

Gold futures to $2,035.20 an ounce.
Silver futures to $22.89 per ounce.
West Texas Intermediate crude to $75.09 a barrel.
Brent crude to $80.04 a barrel.

Gold hit its lowest level on Wednesday after strong US PMI data supported the dollar and yields rose as investors reduced their bets of a rate cut in the spring. Gold will likely be dependent on US data emerging this week including GDP estimates today and PCE inflation tomorrow. Any further pushback from the Fed at its policy meeting next week will make gold vulnerable to further slides.

US crude oil stockpiles slumped last week after winter weather hit crude production, causing a 1 million bpd drop, according to the Energy Information Administration. The EIA estimated that this is the biggest drop since September 2021. US Crude inventories fell by 9.2 million barrels to 420.7 million barrels in the week ending 19 January.

Note: As of 5 pm EST 24 January 2024

Key data to move markets this week

EUROPE

Thursday: German IFO Current Assessment, Business Climate and Expectations and ECB Monetary Policy Statement and Press Conference.
Friday: German Gfk Consumer Confidence and German Bundesbank Monthly Report. 
Tuesday: German GDP, Spanish GDP (estimate), Spanish Harmonised Index of Consumer Prices, Eurozone GDP, Eurozone Business Climate Survey, Eurozone Consumer Confidence, and Eurozone Economic Sentiment Indicator.
Wednesday: German Retail Sales, French CPI, German Unemployment Change and Unemployment Rate, and German Harmonised Index of Consumer Prices and CPI.
Thursday: EU Leaders Summit, Spanish, German, and Eurozone Manufacturing PMIs, Eurozone Harmonised Index of Consumer Prices, Eurozone Core Harmonised Index of Consumer Prices, and Eurozone Unemployment Rate.

UK

Friday: Gfk Consumer Confidence.
Thursday: S&P Global/CIPS Manufacturing PMI, BoE Interest Rate Decision, Monetary Policy Report, BoE Minutes and BoE Governor Andrew Bailey speech.

US

Thursday: Initial Jobless Claims, GDP, Durable Goods Orders, Nondefense Capital Goods Orders, Core Personal Consumption Expenditures, Personal Consumption Expenditures Prices and New Home Sales Change.
Friday: Personal Consumption Expenditures Price Index, Personal Income, Personal Spending, Core Personal Consumption Expenditures Price Index, and Pending Home Sales.
Tuesday: Housing Price Index, JOLTS Job Openings, and Consumer Confidence.
Wednesday: ADP Employment Change, Employment Cost Index, Chicago Purchasing Managers’ Index, and Fed Monetary Policy Decision and FOMC Press Conference.
Thursday: Challenger Job Cuts, Initial Jobless Claims, Unit Labour Costs, Nonfarm Productivity, S&P Global Manufacturing PMI, ISM Manufacturing PMI, ISM Manufacturing Prices Paid, ISM Manufacturing New Orders and ISM Manufacturing Employment Index.

CHINA

Wednesday: NFP Manufacturing and Non-Manufacturing PMIs.
Thursday: Caixin Manufacturing PMI.

Global Macro Updates

Global risks at highest level. The Doomsday Clock has been set at 90 seconds to midnight for the second year in a row. As noted by UK newspaper, The Guardian, this is largely due to the continuing threat of a nuclear escalation in Ukraine, the widening conflict in the Middle East, and the lack of action on the climate crisis, which threatens “billions of lives”. Rachel Bronson, PhD, president and CEO, Bulletin of the Atomic Scientists, said, “We are living in a time of unprecedented danger, and the Doomsday Clock time reflects that reality. 90 seconds to midnight is the closest the Clock has ever been set to midnight, and it’s a decision our experts do not take lightly.” The Doomsday Clock’s time is set by the Bulletin of the Atomic Scientists’ Science and Security Board with the support of the Bulletin’s Board of Sponsors, which includes 10 Nobel Laureates. Previously, the Doomsday Clock had been set at 100 seconds to midnight since 2020.

US economy continues to show strength. Business activity picked up this month and inflation appeared to abate, with prices charged by companies for their products sliding to a more than 3-1/2 year low. The S&P Global flash Composite PMI Output Index increased to 52.3 in January, from 50.9 in December. This is the highest level since June 2023. The survey's flash manufacturing PMI rebounded to a 15-month high of 50.3 from 47.9 in December. Its flash services sector PMI came in at 52.9, also the highest reading since last June, from 51.4 in December. Chris Williamson, S&P Global Market Intelligence Chief Business economist, said, "With the survey indicating that supply delays have intensified while labour markets remain tight, cost pressures will need to be monitored closely in the coming months, but for now the survey sends a clear and welcome message of resilient economic growth and sharply waning inflation.“ The survey's flash composite new orders index also rose to a seven-month high of 52.2 in January from 51.2 in December. Prices paid by businesses for inputs increased at a moderate pace with the output prices gauge falling to 51.7, the lowest reading since May 2020, from 54.8 in December.

A resilient US economy and comments from Fed policymakers about the timing of interest rate cuts have caused investors to reassess their bets on how quickly the Fed will cut rates this year. Traders now see an 85.5% chance of a rate cut in May, according to CME Group's FedWatch Tool.

China’s stimulus push. The PBoC cut the reserve requirement ratio (RRR) on Wednesday. PBoC Governor Pan Gonsheng said that the central bank was slashing the reserve requirements for all banks by 0.5% on 5 February, releasing 1 trillion Yuan (about $140 billion) of long term liquidity into the market. According to NikkeiAsia, he said, “it was done in order to create a good monetary and financial environment to operate the economy.” Chinese and Hong Kong stock markets have experienced a $6.3 trillion stock selloff since they reached a peak in 2021. As noted by Bloomberg news, the selloff risks damping consumer spending and business investment, making the economy’s troubles even worse.

UK growth provides headwind for the BoE. UK economic activity increased at the fastest pace in seven months in January with the S&P Global flash UK composite output index rising to 52.5 points from 52.1 in December. Chris Williamson, S&P Global Market Intelligence Chief Business economist, said “the reading pointed to the economy growing at a quarterly rate of 0.2% in 2024 after a flat Q4 2023, therefore skirting recession and showing signs of renewed momentum.” This should be good news for the BoE, due to meet on 1 February. The BoE is expected to maintain rates with the first cut not anticipated until Q3.

Europe’s stuck in a rut. S&P Global’s flash eurozone composite purchasing managers’ index, a measure of business activity across the bloc, rose slightly to 47.9, up from 47.6 a month earlier, after an improvement in manufacturing offset a deeper decline in services. The eighth consecutive PMI reading below the 50 mark, which separates contraction from expansion, indicates the risk to eurozone growth remains. The output prices index rose to 54.2 from 53.8, its highest since May last year. The situation is also poor for Europe’s largest economy, Germany. The HCOB German Flash Composite PMI fell for the seventh consecutive month to 47.1 in January from December's 47.4. In addition, the Ifo Institute said earlier today its business climate index had fallen 1.1 points, from a slightly downwardly revised reading of 86.3 in December to 85.2 January, its lowest level since May 2020.

There are also growing concerns that the attacks by Yemen's Iran-aligned Houthis in the Red Sea are disrupting shipping, which increases the risk of consumer prices rising and growth slowing due to the inability of businesses to get necessary inputs in time and needing to pass on additional costs to the consumer at some stage if these attacks continue. The ECB will very likely keep interest rates unchanged today and is likely to push back on investor bets for aggressive policy easing this spring as ECB President Christine Lagarde and Chief economist Philip Lane have repeatedly pointed to first-quarter wage settlements, available in May, as a relevant gauge. Unemployment in the Eurozone has been at record lows as companies hoard labour. However, with inflation risks rising and growth slowing, it will be a difficult balance for the ECB. Financial markets now see 130 basis points of rate cuts this year, with the first move in April or June.

While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

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