Hey folks, it is Super Bowl weekend and this game, being in a State with legal gambling promises to be the electric! The markets have also been on fire since bouncing off the lows last October. Will this run last or will price action roll back over again like last August,
Get my take in this week’s Round-Up,
WEEKLY SOUND BITES:
US indexes ended lower in a week with relatively few important economic releases or other concrete drivers of sentiment. Statements from Fed officials appeared to send stocks in opposite directions on Tuesday and Wednesday. Stocks rallied Tuesday, after Fed Chair “Boom Boom” Powell, repeated an earlier reference to the disinflation process having started. Some investors had worried that the major upside surprise in the January payrolls report, released the previous Friday, might cause Powell to change his tone. However, since the October lows, stocks moved up close to +15% in a four-month period, while the benchmark fed funds rate rose by a stout 1.5%, and financial conditions tightened further. There’s an argument that the market rally over the past four months has been in anticipation of the Fed nearing the end of the tightening cycle. The market risk would be the Feds keeping rates higher for longer than expected which would reduce forward market valuations and hence, move most equites lower.
After the previous Friday’s big surprises, the week’s light calendar of economic data came in largely in line with consensus expectations. Weekly jobless claims were slightly higher than expected, at 196,000, but remained near recent nine-month lows. The University of Michigan’s preliminary gauge of February consumer sentiment, released Friday, moderately exceeded expectations and reached its highest level (66.4) since January 2022.
The yield on the benchmark 10-year U.S. Treasury note increased solidly over the week as investors appeared to continue digesting the previous week’s strong January payrolls report. The yield curve inverted further—Bloomberg reported that two-year Treasury yields moved to their highest level over 10-year yields in four decades—as fears grew that the Fed would need to push the economy into recession to tame inflation.
Shares in Europe weakened on concerns about overly aggressive central bank policy that might prolong an economic downturn. Several European Central Bank (ECB) policymakers reasserted their hawkish stance in the wake of the most recent rate-setting meeting, warning against complacency in the fight against inflation. The UK avoided a recession last year, despite a sharp economic contraction in December, official data showed. Gross domestic product (GDP) came in flat in the final three months of last year, avoiding a second consecutive quarter of economic contraction.
In considering the selection for the new BoJ governor, Prime Minister Kishida will pay close attention to the potential impact on financial markets. After Japanese markets closed on Friday, the Nikkei news agency reported that the government plans to appoint Kazuo Ueda. Ueda’s previous comments and actions suggest a more balanced tone with consideration of the risks from excessive easing and also the importance of reaching 2% inflation sustainably.
China reported that its consumer price index picked up 2.1% in January from a year ago, in line with estimates, while producer prices fell more than expected due to lower commodity costs. The latest data showed that China isn’t likely to experience runaway inflation similar to the U.S. and Europe and raised expectations that the central bank would keep policy supportive to bolster the economy. Meanwhile, Chinese stocks retreated as the spy balloon controversy fanned tensions with the U.S. and offset expectations of faster economic growth following China’s exit from pandemic controls.
Enjoy this week’s Round Up;
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
