Stocks trying to rebound, despite still more hawkish Fed

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.

• 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).

• 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.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 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