Hey everyone, as a quick reminder, US markets will be closed on Monday but that may not slow down the momentum we’ve seen over the past few weeks as we kick off 2023. But will it last?
Get my take in this week’s Market Round-Up.
Kicking off 2023, stocks recorded a second consecutive week of gains as investors weighed key inflation data and quarterly earnings reporting season kicked off in earnest on Friday. JPM, WFC, and BAC beat consensus expectations when they released earnings Friday morning, but cautious outlooks from the banking giants caused shares to fall in early trading.
Headline CPI fell 0.1% in December, a tick lower than expected and the first decline since May 2020. The drop brought the year-over-year gain to 6.5%, its lowest level since October 2021. The 12-month increase in Core CPI (less food and energy) fell as expected to 5.7%, also the slowest pace in over a year. Weekly jobless claims fell to a three-month low of 205,000, while the University of Michigan’s preliminary reading of consumer sentiment jumped much more than expected and reached its highest level since April. The survey showed that consumers expected prices to rise 4.0% over the next 12 months, down from 4.4% in December, although longer-term expectations rose a bit, from 2.9% to 3.0%.
The cooling inflation data helped U.S. Treasury yields to continue trending lower, with the yield on the benchmark 10-year U.S. Treasury note falling on Friday morning to an intraday low of 3.43%, its lowest level since soon after the Fed’s mid-December meeting.
Eurozone unemployment remained at 6.5% in November, as expected by economists, official data showed. Meanwhile, investor morale strengthened for a third straight month in January…we see that the German economy likely stagnated in Q4 of 2022, after growing 0.4% in the previous three months. The Finance Ministry said the data pointed to a milder, shorter slowdown over the winter. For the full year, the German economy expanded 1.9%, down from 2.6% in 2021, as the Russia-Ukraine war and surging energy costs curbed output. And in the UK, GDP grew 0.1% sequentially in November, beating a consensus forecast for a 0.2% contraction. Bank of England (BoE) indicated the UK faced the risk of persistent inflation, hinting that interest rates would probably rise again.
In Japan, as Core CPI rose 4.0% year on year in December—the fastest rate in 40 years—speculation grew that the BoJ could revise up its inflation forecasts and assess the viability of further monetary policy adjustments at its next meeting (January 17–18). The BoJ is also likely to revise up its forecasts for the consumer price index for fiscal years 2023 and 2024 to be closer to its 2% target.
In China, hopes that domestic demand will recover in the coming months rose after Beijing abandoned its zero-COVID policy in December and officials stepped up measures to support the struggling property sector. On the trade front, China’s exports fell 9.9% in December from a year ago as global demand softened and rising infections disrupted activity after the government rolled back pandemic restrictions. Imports fell a better-than-expected 7.5%.
Enjoy this week’s round-up;
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