Is it safe to bet against the Fed?

Is it safe to bet against the Fed?
  • Corporate earnings reports and news
  • Global market indices  
  • Commodity sector news  
  • Currencies
  • Key data to move markets this week 
  • Global macro updates  

Corporate Earnings News

A better than expected season? According to Refinitiv I/B/E/S data, as of 8 February 2023, the 22Q4 Y/Y blended earnings growth estimate is -2.9%. Of the 297 companies in the S&P 500 that have reported earnings to date for 22Q4, 69.0% reported above analyst expectations compared to a long-term average of 66%. The 22Q4 Y/Y blended revenue growth estimate is 4.9%. 

Has the best bot already won? Alphabet saw $100 billion in market value wiped off its shares on Wednesday after it posted a short GIF video of its new AI chatbot, Bard, in action via Twitter, promising it would help simplify complex topics. It instead delivered the wrong answers. On Tuesday, Microsoft announced it was revamping its Bing search engine and Edge Web browser with artificial intelligence. It is developing an intelligent chatbot with startup Open AI that will work within Bing's search results, creating AI that can summarise web pages, synthesise disparate sources, even compose emails and translate them. According to Refinitiv, Microsoft expects every percentage point of share it gains will bring in another $2 billion in search advertising revenue.

It’s a sad world after all. The Walt Disney Company on Wednesday announced a new restructuring under recently reinstated CEO Bob Iger, cutting 7,000 jobs as part of an effort to save $5.5 billion and make its streaming business profitable. The layoffs represent an estimated 3.6% of Disney's global workforce. The restructuring will include the formation of Disney Entertainment, which will bring together Disney Studios, General Entertainment, Animation, Disney+, 20th Century Studios, Searchlight, and Hulu. ESPN will remain a separate entity and include ESPN+. A third division will be Disney Parks, Experiences, and Products and also includes gaming and publishing. The new structure is effective immediately. Shares of Disney rose 8% to $120.77 in after-hours trading on Wednesday. 

Corporate Earnings calendar 9 February - 16 February 2023

Thursday: AbbviePepsicoPhilip MorrisPayPal HoldingsAstraZenecaUnileverExpedia GroupSiemensAegonS&P GlobalBritish American TobaccoDuke EnergyZurich Insurance GroupKellogVerisignBaxter InternationalVentasCloudflareBorgWarnerTapestryBruker CorporationMotorola SolutionsDexComCredit AgricoleSwisscomWillis Towers WatsonTyson FoodsCredit Suisse

Friday: EnbridgeGlobal Payments Inc.Magna InternationalMettler- ToledoFortisMr Cooper Group

Monday: Palantir TechnologiesLattice SemiconductorOtter Tail CorporationTreehouse FoodsSolarEdgeFirstEnergyCheck Point SoftwareArista NetworksCadence Design Systems

Tuesday: Know LabsCoca-ColaAirbnbUpstart HoldingsMarriott

Wednesday: The Kraft Heinz CompanyBarrick GoldThe Trade DeskCisco SystemsQuantumScapeRokuTwilioAnalog DevicesKeringEquinixSynopsysAlbemarleWelltowerAmerican Water Works CompanyMartin Marietta MaterialsAmeren

Thursday: Applied MaterialsNestleAirbusSouthern CompanyDigital Realty TrustCenovus EnergyConsolidated EdisonEpam SystemsPPL CorporationWest Pharmaceutical ServicesHubSpot

US Stock Indices

Nasdaq 100  3.27% MTD and  14.25% QTD 
Dow Jones Industrial Average  0.21% MTD and  3.05% QTD 
NYSE  0.63% MTD and  4.94% QTD 
S&P 500  2.14% MTD and  8.45% QTD 

Mega caps had another mixed week with Microsoft, although , managing to erase gains on Wednesday that put its market value above $2 trillion. Amazon Apple very slightly Nvidia Tesla , and Meta Platforms .

Information Technology stocks such as Intel CorporationTexas InstrumentsApplied MaterialsAutodeskCisco Systems, and Advanced Micro Devices were all  this week.

Energy stocks such as BP and Exxon Mobil were  this week as they reported record Q4 profits. Other energy stocks such as ShellBaker Hughes CompanyHessPhillips 66, and Occidental Petroleum Corporation were also all  over the week. 

Materials and Mining stocks were mixed with DuPont de Nemours and LyondellBasell Industries  and AlbemarleWestrock Company, and Newmont Corporation .

European Stock Indices

Stoxx 600  1.38% MTD and  8.14% QTD 
DAX  1.88% MTD and  10.69% QTD 
CAC 40  0.53% MTD and  9.98% QTD 
IBEX 35  2.14% MTD and  12.13% QTD 
FTSE MIB  2.11% MTD and  14.57% QTD
FTSE 100  1.46% MTD and  5.82% QTD 

Other Global Stock Indices

MSCI World Index  0.95% MTD and  8.12% QTD 
Hang Seng  2.56% MTD and  7.59% QTD

Fixed Income

US 10-year Treasuries  to 3.62%.
German 10-year bunds  to 2.36%.
UK 10-year gilts at 3.31%.

Short-dated eurozone bond yields were up this week after the ECB said it would cut the interest rate it pays governments on deposits while US yields have risen after Federal Reserve chair Jerome Powell acknowledged on Tuesday that interest rates may need to move higher than expected given the strength of the labour market and it threatening the ability of the Fed to progress in lowering inflation.

Commodities

Spot Gold to $1,874.58 per ounce.
Spot Silver to $22.28 per ounce.

West Texas Intermediate crude to $78.47 a barrel.

Brent crude to $85.09 a barrel.

Oil rose this week on hopes of China’s re-opening supporting demand and a slowing pace of US interest rate rises meaning a softer landing. The earthquake that hit Turkey and Syria on Monday stopped crude oil flows from Iraq and Azerbaijan out of the Turkish port of Ceyhan. According to Refinitiv, BP Azerbaijan has declared force majeure on Azeri crude shipments from the port. Iraq's pipeline to Ceyhan resumed flows on Tuesday. However, US crude oil stocks rose to their highest level since June 2021 and oil production rose to its highest since April 2020.  

Currencies

The USD gained this week on changing expectations about just how high the Fed will go. The GBP is  0.21% YTD against the USD and the EUR  0.07% YTD. 

Bitcoin  0.04% MTD and  38.52% YTD.
Ethereum  4.76% MTD and  37.93% YTD.

Note: As of 5 pm 8 February 2023 EST 

Key data to move markets this week

Europe: 

Friday: EU leaders summit and a speech by ECB executive board member Isabel Schnabel. 
Monday:
 Eurogroup meeting. 
Tuesday:
 EcoFin meeting, Eurozone GDP, and Eurozone unemployment change data. 
Wednesday:
 Spanish Harmonised Index of Consumer Prices and Eurozone Industrial production.
Thursday: 
ECB Economic Bulletin.

UK: 

Friday: GDP, Industrial production, Manufacturing production, and a speech by Bank of England Chief Economist Huw Pill. 
Tuesday:
 Average earnings data, Claimant count change, Claimant count rate, and ILO unemployment rate. 
Wednesday: 
CPI, Core CPI, PPI, PPI core output, and RPI. 

US: 

Friday: Michigan Consumer Sentiment Index, University of Michigan 5-year Consumer Inflation Expectations Survey, and a speech by Federal Reserve board member Fred Waller.
Tuesday:
 CPI and CPI ex food and energy. 
Wednesday:
 Retail sales.
Thursday:
 Building permits, Housing starts, Initial jobless claims, Continuing jobless claims, Philadelphia Fed Manufacturing Survey, PPI, and PPI ex food and energy.

Global Macro Updates

An ever aggressive Fed? Fed chair Jerome Powell suggested on Tuesday that the Fed may raise its benchmark interest rate higher than the 5.00% to 5.25% peak range that the central bank anticipated before last Friday's strong employment showing of 517,000 new jobs in January. Fed Bank of Minneapolis President Neel Kashkari Min said Wednesday that surging jobs growth was proof that the Fed needed to “raise rates aggressively.” The need for further tightening was also stressed by Fed Bank of New York President John Williams who said on Wednesday that the Fed has more work to do on rates, but that he still sees a peak rate of 5.25% as "reasonable" with 25-basis-point hike increments. 

The ECB’s tightening path to go higher. According to Dutch central bank governor Klaas Knot, the ECB may need to deliver another 50 basis points interest-rate increase after a planned hike of that size at March’s meeting. In a MNI Market News webcast he said, “I consider it highly unlikely that the March hike will be our endpoint and if underlying inflation pressures do not materially abate, maintaining the current pace of hikes into May could well remain warranted.” This sentiment was echoed by Latvian central bank governor Martin Kazaks who, as noted by Bloomberg, said on Wednesday, “It’s natural to expect rate increases will slow to smaller increments, but we’re not there…I’m very aligned with the 50 basis-point increase in March and after March I don’t see a reason to take a pause or stop rate increases.” These comments followed Executive Board member Isabel Schnabel's statement on Tuesday that the unprecedented monetary tightening to date has had little effect on inflation.

A crypto banking problem? As noted by the Financial Times, Binance hosted 55% of the world’s spot crypto trading in January, an increase of 7% since the collapse of FTX in November, according to data from research provider CryptoCompare. This comes after Binance said it will suspend deposits and withdrawals of US dollars via bank accounts. Binance said in January that its US banking partner Signature Bank would no longer handle user transactions less than $100,000. Almost none of Binance’s customers make US dollar bank transfers, and Binance’s US division is not really affected by the suspension. However, it does point to weaknesses between banks and crypto. According to Coindesk two weeks ago, Caitlin Long-founded Custodia Bank (formerly Avanti Bank), with its focus on crypto assets, was denied its application for membership by the US Federal Reserve Board. This is an additional sign of difficulty between crypto holders, banks, and regulators with Signature, as noted by Bloomberg, saying in December that it intended to shed up to $10 billion in deposits from digital asset clients and crypto bank Juno only resuming its services after having to pause them in early January.

DISCLAIMER: 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.

This article is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here.

Next article
Created by professionals. For professionals.
privacy protect
Version 1.1.0-5c5a43a6
EXANTE Awards

We are recognised globally by industry experts and clients. Check out our awards!