Market Analytics and Considerations
Key notes
This morning, the March S&P 500 futures (ESH23) are rising steadily +0.27% now since three important U.S. indexes fell for a third consecutive session and experienced a second successive week of failures on Friday as hardline remarks from the Federal Reserve and weak economic statistics increased investors’ concern regarding about an economic downturn in the coming year. Utilities, Consumer Goods, and Oil & Gas sector declines were the main contributors to the decline in three main U.S. stock indices.
Three U.S. bourses ended Friday’s hour of trading negative, as the likelihood of a “Santa Claus bounce” in the markets this year dwindled as most central banks around the world took restrictive measures. A tightening labor economy and other variables are likely to keep price pressures strong, solidifying high rates of interest for certain time, added New York Fed President John Williams on Friday. Williams did, though, add that despite the Fed’s vigorous tightening, he does not anticipate a recession.
Mary Daly, president of the San Francisco Federal Reserve Bank, stated on Friday that there remains a considerable distance to go and the Fed’s policy rates may remain high through the first few months into 2024.
In the meantime, February’s monetary and fiscal policy event is expected to result in a 73.0% likelihood of a 25 basis point rise in interest rates and a 27.0% possibility of a 50 basis point hike, according to U.S. rate futures.
The third-quarter GDP, initial jobless claims, core durable goods orders, core PCE price index, PCE price index, personal spending, Michigan consumer expectations, Michigan consumer sentiment, and new home sales are just a few of the economic statistics that market players will be keeping an eye on in the forthcoming week.
On Monday, the U.S. economic data calendar is largely empty; nevertheless, investors may pay attention to the U.S. NAHB Housing Market Index. According to economists, this figure will increase from its prior value of 33 to 34 in December.
After a significant selloff last week spurred by escalating recessionary fears, the Euro Stoxx 50 futures are up +0.34% this Monday, supported by energy companies. The week before, European markets suffered significant losses as the European Central Bank slowed the tempo of its interest rate increases but still hinted at further tightening to combat high inflation. Klaas Knot, a member of the ECB governing council, stated on Friday that “us central bank does have a longer distance to go” in terms of increasing interest rates than the Fed.
United States 10-Year rates are at 3.528% in the bond markets, rise +1.31%.
Markets may also pay close attention to remarks made later on Monday in Madrid by ECB Vice-President Luis de Guindos for additional hints more about policymakers’ mindset.
Today saw the publication of statistics on Germany’s Business Expectations, Ifo Business Climate Index, and Germany’s Current Assessment.
German December business expectations were higher than expected, at 83.2 as opposed to 82.0.
The German Ifo Business Climate Index for December came in at 88.6, which was higher than the predicted reading of 87.4.
German December Overall Assessment was greater than anticipated at 94.4 compared to 93.5.
Meanwhile, despite fresh speculations that the Bank of Japan would tighten its omni loose monetary policy, Japan’s Nikkei 225 Stock Index closed lower. That according media reports, the Japanese government may change a contract it made with the Bank of Japan a decade ago regarding the latter’s objective of 2% inflation. Losses in the sectors of communication, steel, and electrical/machinery accelerated the index’s decline. The implied volatility of the Nikkei 225 options is taken into consideration by the Nikkei Volatility, that increased 8.89% to 17.76 at the close.
