Stocks trying to rebound, despite still more hawkish Fed

Intermediate

Macroeconomic/ geopolitical developments

  • Ongoing concerns of global inflationary pressures have seen an erratic start to the year for global markets, seen again last week.
  • The US CPI data for December showed a 7% rise over a year, the highest inflation rate since 1982! Although this was priced in, it continues to fuel inflationary and higher interest rate worries.
  • The more hawkish tone from members of the Federal Open Market Committee (FOMC) has seen interest rate markets price in four rates hikes from the US Fed in 2022.
  • Although Chairman Powell did seek to reassures markets in a testimony to Congress on Tuesday, Lael Brainard, a Fed dove, has affirmed a more hawkish tone, whilst Governor Christopher Waller highlighted there could be as many as five rate hikes this year if need be.
Lael Brainard
  • Earnings season kicked off in earnest on Friday with the financial sector, with JPMorgan Chase and Citigroup slightly disappointing.

Global financial market developments

  • Global stock averages were slightly lower last week, led by the US indices and in particular the tech sector, although early week losses were somewhat recouped.
  • Higher yield pressures from early January were eased, with US and global Bond markets dipping from recent high yields and consolidation, but continue to reflect ongoing
  • The US Dollar was notably weaker within G3 (versus the Japanese Yen and Euro).
eurusd
  • Commodity currencies, the Australian, New Zealand and Canadian Dollars were also stronger versus the greenback, though did weaken at the end of the week.
  • Gold maintained a more negative tone, aided by the weaker US Dollar.
  • Oil further extended its late 2021 rally into 2022, hitting multi-month highs.
  • Copper retains a positive tone within a broader rang, trying to breakout to the upside.

Key this week

  • Geopolitical focus:
    • The US MLK holiday is on Monday 17th January and sees US markets closed.
    • Still monitoring the economic impact of the Omicron variant of COVID-19.
  • Central Bank Watch: We get the Bank of Japan (BoJ) interest rate decision, statement and press conference on Tuesday, and the Peoples Bank of China (PBoC) interest rate decision on Thursday.
  • Macroeconomic data: Inflation data will be key through the week, with UK, German, Canadian and EU CPI releases on Wednesday and Thursday.
  • Earnings data: US earnings season continues with standouts being Bank of America and Goldman Sachs on Tuesday, United Health, P&G, ASML and Morgan Stanley on Wednesday, and Netflix on Thursday.
netflix
DateKey Macroeconomic Events
17/01/22China GDP and Industrial Production
18/01/22BoJ interest rate decision, statement and press conference; UK Employment report; German ZEW Survey
19/01/22UK inflation data (including CPI); German CPI; Canadian CPI;
20/01/22Australian Employment report; PBoC interest rate decision; EU CPI
21/01/22BoJ Meeting Minutes; UK Retail Sales; Canadian Retail Sales

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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