- Corporate earnings calendar
- All eyes on the Fed
- Europe’s feeling more hopeful
- The UK falling behind
- A positive start of the year for Crypto
- Key data for the coming week
S&P 500 3.47% QTD
Nasdaq 100 7.98% QTD
Dow Jones Industrial Average 1.77% QTD
NYSE 4.64% QTD
Stoxx 600 6.40% QTD
DAX 8.32% QTD
CAC 40 8.81% QTD
IBEX 35 8.85% QTD
FTSE MIB 9.15% QTD
FTSE 100 3.93% QTD
MSCI World Index 6.20% QTD
Bitcoin 42.76% MTD
Ethereum 35.67% MTD
Note: As of 5 pm 25 January 2023 EST
Corporate Earnings calendar
Thursday: Visa, Inc., Mastercard, Comcast Corporation, Northrop Grumman, Archer-Daniels-Midland, Intel, Sherwin-Williams, KLA-Tencor, Nucor, Xcel Energy, T. Rowe Price Group, Southwest Airlines, McCormick & Company, V.F. Corporation
Friday: Chevron, American Express, Colgate-Palmolive, LG Electronics, Booz Allen Hamilton, HCA Holdings, Church & Dwight Company
Monday: Canon, Ryanair Holdings, Franklin Resources, Graco
Tuesday: Exxon Mobil Corporation, Pfizer, McDonald's, United Parcel Service, Chubb, Marathon Petroleum, General Motors, Phillips 66, Mondelez, Spotify, International Paper Company, Stryker Corporation, Hubbell, Boston Properties
Wednesday: Meta Platforms, Novo Nordisk, Thermo Fisher Scientific, Novartis, T-Mobile US, Altria Group, Boston Scientific Corp., Waste Management Inc., Metlife, Humana, Allstate
Thursday: Alphabet, Amazon, Apple, Eli Lilly, Roche, Merck & Company, ConocoPhillips, Shell, Bristol-Myers-Squibb, QUALCOMM, Honeywell International, Starbucks, Gilead Sciences, Estee Lauder , Becton, Dickinson & Co., Illinois Tool Works, Ingersoll-Rand, Cognizant, Deutsche Bank, Sirius XM, Publicis Group, Stanley Black & Decker, NortonLifeLock
Will the Fed put on the brakes? The Fed will be looking very closely at its preferred measure of inflation, the personal consumption expenditure price index (PCE) on Friday, to see if it is indeed time to slow down the pace or rate hikes. Although economic performance remains soft, with the S&P Global's flash Manufacturing PMI coming in at 46.8 in January, still signalling contraction, it was up from 46.2 in December. As noted by S&P, despite subdued demand conditions and a further solid decrease in backlogs of work, US firms recorded a marginal rise in employment at the start of 2023. In short, the economy appears to be slowing down but a tight labour market remains, creating concerns about demand for the Fed. It is now widely expected by many market analysts that the Fed will raise rates 25 basis points at its 31 January -1 February meeting and again at its March meeting.
The US hit its debt ceiling of $31.4 trillion on 19 January but the Department of the Treasury has been undertaking a set of “extraordinary cash management measures” so that the debt limit is not causing a government shutdown — yet. The Treasury estimates that those measures will be sufficient at least through early June. However, the risks of shutdown or worse are greater than they were in previous years when the debt ceiling has been breached. This is largely due to Republican House speaker, Kevin McCarthy, making promises to hardliners in his party that he would attach large spending cuts to any legislation raising the debt limit, if they agreed to elect him as speaker. The deadlock is likely to continue for several months as the Democrats will not be willing to give in or give up.
The USD has lost ground so far this year as falling inflation in the US is likely to reduce the pace of rate hikes. The GBP is 2.50% YTD against the USD, the EUR approximately 1.95% YTD, and the YEN is over 1.1%, despite the Bank of Japan keeping its bond yield cap in place for now.
This week was a mixed week for mega cap stocks with Microsoft sounding the alarm for things to come in the tech sector as it warned in its quarterly earnings report of a steep fall in client spending. Nevertheless, Amazon, Apple, Nvidia, and Meta Platforms ended the week up.
Other tech stocks like Advanced Micro Devices, Monolithic Power Systems, Western Digital Corporation, and Zebra Technologies were also all up over the week.
Energy stocks like Baker Hughes Company, ConocoPhillips, Occidental Petroleum Corporation, Coterra Energy, and Chevron were largely flat over the week.
Will the ECB be too aggressive? According to an increasing chorus of ECB policymakers including Bundesbank President Joachim Nagel and Central Bank of Ireland Governor Gabriel Makhlouf, interest rate increases will continue in February and March and may move into the second quarter. According to Refinitiv, Makhlouf said that, as things stand, rates will need to go up again in March, but policymakers must "wait and see exactly what the data tells us." ECB President Christine Lagarde also appeared to support the timeline of rate rises. The ECB is highly likely to raise rates by at least 50 basis points during its next meeting on 2 February. The new-founded hawkishness has led Eurozone borrowing costs to edge up and yield spreads between core and peripheral bonds to widen. However, European stocks and the Euro rallied this week as more positive news on Eurozone growth emerged with the S&P Global ‘flash’ Eurozone PMI Composite Output Index rising for a third consecutive month in January to 50.2, up from 49.3 in December, indicating the first expansion of business activity since June.
The UK’s slowdown continues. The Bank of England (BoE) is expected to raise rates another 50 basis points at its meeting on 2 February despite signs that the economy is slowing down. The S&P/CIPS global flash UK composite purchasing managers’ index, a measure of private sector activity, fell to 47.8, down from 49 in December, marking the fastest rate of decline since January 2021. The services sector contributed most to the downturn, with business activity falling to 48 in January from 49.9 in the previous month. Even though the S&P Global/CIPS UK Manufacturing PMI increased to 46.7 in January from 45.3 in December, it signalled a sixth consecutive month of falling factory activity.
Crypto miners on the up. Despite the bankruptcies of Crypto lenders Genesis, BlockFi Inc., Celsius Network and Voyager Digital and reports by Crytponews.com and Coindesk.com that the Bitcoin Cash (BCH) supporter Roger Ver, also known as “Bitcoin Jesus”, has been sued by the now-bankrupt crypto lender Genesis after failing to meet a $21 million margin call, cryptocurrencies, particularly Bitcoin and Ethereum have been rallying so far this year. It appears that investors may think that the bottom was reached in crypto markets in 2022 as all the previously hidden bad governance and risk management practices have come to light. And for those that think the price of cryptocurrencies is correlated with a better macroeconomic environment and lower interest rates, suggestions that recession may be avoided in the US with a slower pace of Fed rate hikes. As noted by the Financial Times, the rise in the value of Bitcoin is incentivising the owners of huge “mining” server warehouses to accelerate their use in the battle to secure more Bitcoins and underpinning investor optimism in listed mining companies.
Key data to look out for this coming week
Friday: Spanish GDP.
Monday: German GDP, Spanish CPI data, Eurozone Business Climate, Consumer Confidence, and Economic Sentiment.
Tuesday: Eurozone GDP, French GDP, German Retail Sales data, German unemployment rate and change data, German Harmonised Index of Consumer Prices data, and the ECB Bank Lending Survey.
Wednesday: Spanish, Italian and French S&P Global Manufacturing PMI, German S&P/BME Global Manufacturing PMI, Eurozone S&P Global Manufacturing PMI, Eurozone Core Harmonised Index of Consumer Prices data, Eurozone Harmonised Index of Consumer Prices data, and the Eurozone unemployment rate.
Thursday: German trade balance, ECB Monetary Policy Decision Statement and press conference.
Wednesday: S&P Global/CIPS Manufacturing PMI.
Thursday: Bank of England Interest Rate decision, Monetary Policy report, minutes and summary and a speech by Bank of England Governor Andrew Bailey.
In the US:
Friday: Core personal consumption expenditures price index data, Personal Income, Personal Spending, Michigan Consumer Sentiment Index, Pending Home Sales, and University of Michigan 5-year Consumer Inflation Expectations Survey.
Tuesday: Consumer Confidence, Housing Price Index, S&P/Case-Shiller Home Price Indices, and Chicago Purchasing Managers’ Index.
Wednesday: Federal Reserve Interest Rate Decision and Monetary Policy Statement, S&P Global Manufacturing PMI, ADP Employment Change, ISM Manufacturing Employment Index, ISM Manufacturing New Orders, ISM Manufacturing PMI, ISM Manufacturing Prices Paid, and Jolts Job Openings.
Thursday: Initial jobless claims, Continuing jobless claims, Nonfarm productivity, and Unit labour costs.
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