Last week, the international market was volatile. The key inflation indicators in the United States are better than expected, and the European Central Bank is holding its ground.
In terms of the market, the US stock market continued to rise, with the Dow Jones Industrial Average up 0.65%, the Nasdaq up 0.94%, and the S&P 500 index up 1.06%. The three major European stock indexes performed well, with the FTSE 100 index in the UK up 2.32%, the DAX 30 index in Germany up 2.45%, and the CAC 40 index in France up 3.56%,
There are a lot of things to look forward to this week. The Federal Reserve and the Bank of England will hold an interest rate meeting. The US non farm, Eurozone gross domestic product (GDP), consumer price index (CPI) and other data in January are quite important. Investors also need to pay attention to the latest bond issuance news from the US Treasury. The US stock market financial reporting season is approaching a critical moment as tech stocks such as Apple and Amazon announce their performance. OPEC+holds a ministerial meeting to pay attention to its comments on the energy market.
Federal Reserve Resolution Becomes Focus
The Federal Reserve policy meeting will undoubtedly be the highlight of the coming week. For a period of time, speculation about the timing and scale of the Federal Reserve's interest rate cut has been the theme of the market. In the remarks before the meeting, the voices of Federal Reserve officials tended to be neutral, and the market's pricing of March's interest rates has gradually aligned with the Federal Reserve's views.
As policy is not expected to change and the Federal Reserve will not release its quarterly economic outlook (SEP), investors will pay attention to the statement made by Federal Reserve Chairman Powell at the press conference. At that time, Powell may continue to suppress speculation from the outside world about policy changes as early as March, and communication about conditions for balance sheet reduction and policy easing may be a focus of attention.
The January non-farm employment report will be released on Friday. A series of recently released data seems to point to a stable and orderly labor market, which also provides conditions for a soft landing of the economy. Institutions predict that after an unexpected warming in December last year, the job market may cool down in January, with the number of new jobs expected to drop to 162000. The unemployment rate is expected to remain unchanged at 3.7%, while the average hourly wage is expected to maintain a moderate increase of 0.3% month on month.
In addition to non farm reports, investors can also evaluate the job market through indicators such as JOLTS job vacancies and ADP employment numbers. In addition, indicators such as the Kessler House Price Index and the ISM Manufacturing PMI Index are also worth paying attention to.
The financial reporting season is gradually entering a good period. This week, tech giants such as Apple, Amazon, Microsoft, Google, and Meta will release their results, which will have a significant impact on market trends. Other noteworthy companies include Pfizer, Mastercard, Qualcomm, Boeing, ExxonMobil, Chevron, and others.
Crude oil and gold
Due to factors such as weather disruptions in US production areas, strong economic data, and concerns about the Red Sea route, international oil prices surged significantly last week. The WTI crude oil near month contract rose 6.50% to $78.01 per barrel, while the Brent crude oil near month contract rose 6.35% to $83.55 per barrel.
Since the New Year, regions such as North Dakota and Texas in the United States have experienced severe cold weather, leading to a more than expected decline in commercial crude oil inventories. At the same time, the higher than expected GDP of the United States in the fourth quarter of last year and the prospect of stimulus policies from the Chinese government have also boosted optimism. Macquarie believes that overall, maintain tactical neutrality and be slightly optimistic until tensions in the Middle East are balanced or eased.
The OPEC+Joint Ministerial Supervisory Committee (JMMC) is scheduled to hold a video conference on February 1st. It is reported that the organization does not intend to make any adjustments to the oil production policy at the meeting. Because Saudi Arabia and its allies have just started a new production reduction operation this month, more time is needed to evaluate its impact.
The international gold price has fallen for the second consecutive week. The COMEX gold futures contract for January delivery on the New York Mercantile Exchange fell 0.38% on the week to $2016.80 per ounce.
Investors shifted their attention to the Federal Reserve's policy meeting in search of more clues on the outlook for interest rates. Ole Hansen, head of commodity strategy at Shengbao Bank, stated in a report that in the short term, the trend of gold will continue to depend on upcoming economic data and its impact on the US dollar, yield, and policy expectations.
David Meger, head of metal trading at High Ridge Futures, said, "The gold market is currently volatile as expectations of interest rate declines are not as fast as the market hopes. However, the underlying theme - the idea that interest rates will fall in 2024 will continue to support gold prices."
Europe may fall into a technological recession
The European Central Bank maintained its three major interest rates at historical highs last week. The European Central Bank stated that the rebound in inflation rates in the eurozone in December last year was mainly due to the reduction of subsidies from governments in multiple European countries for natural gas, electricity, and food, and the overall downward trend of inflation has not changed. However, the increase in wage growth rate and the decrease in labor productivity have led to high price pressures.
European Central Bank President Lagarde pointed out that council members generally believe that it is too early to talk about interest rate cuts, and the European Central Bank will continue to rely on data for decision-making. In the derivatives market, investors have increased their bets on interest rate cuts in April, while policymakers seem to be considering taking action in June.
The GDP data for the fourth quarter of last year in the Eurozone will be released on Tuesday, and the market is expected to contract by 0.1%. As the third quarter has already declined, this means it will enter a technical recession. However, the overall situation is stagnant, not a complete recession. The previously announced January composite PMI for the Eurozone rose slightly to 47.9, a new high since July last year, with manufacturing jumping to a 10 month high and services experiencing a decline.
The Bank of England will hold a meeting on Thursday. Like the previous Federal Reserve and European Central Bank, it is widely expected that the Bank of England will keep interest rates unchanged as the country's inflation rate remains far above the central bank's target of 2%.
It is worth mentioning that Bank of England Governor Bailey has recently firmly emphasized the need to maintain a longer stance on interest rate levels. Considering that the latest economic forecast from the World Bank shows that inflation in the country is expected to drop to 2% faster than expected this year, this may prompt policymakers to consider lifting the view of maintaining policy restrictions for a long period of time.
Highlights of this week