Marketmind: A quart and two halves
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 [February 01, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan.
After a heady January brew, investors now see triples all round.
Global stock markets put in their best January in four years, with Wall
St's tech-heavy Nasdaq clocking its biggest January gains since 2001,
but now face three tense days to assess how durable that is.
On the radar are three interest rate rises from G4 central banks over
the next 26 hours, a mega cap earnings barrage from Apple, Amazon and
Alphabet later on Thursday and then the U.S. January jobs report to
round out a frenetic week.
February kicked off on Wednesday without too much trepidation about how
all that will pan out. Asia and European bourses pushed higher despite a
mixed bag of economic news, but S&P500 futures did slip into the red
ahead of Wall St's open.
Softer U.S. Treasury yields were calm and collected, the dollar easier
and volatility gauges relatively serene.
An expected quarter-point interest rate rise from the U.S. Federal
Reserve later on Wednesday would ruffle few feathers as long as the
central bank doesn't feel the need to accompany its slowing of the rate
hikes with a harsh steer against market pricing for rate cuts later in
the year.
Half-point rate rises from the European Central Bank and Bank of England
are now the best guess, although dire economic readouts from Britain's
ailing economy this year may mean the risk to that consensus is that a
split BoE council opts for a smaller move.
News that euro zone headline inflation fell much faster than forecast
last month to 8.5% - its lowest since last May - will also take some
pressure off the ECB, even if stickier 'core' inflation means a
half-point point move is still the most likely outcome this week.
U.S. markets were also enthused by disinflation signals on Tuesday as
data showed U.S. labor costs increasing at their slowest pace in a year
in the fourth quarter while wage growth slowed.
That was a major relief for those worried about the persistent tightness
in the U.S. jobs markets - one reason the Fed may continue to sound
hawkish later on Wednesday and why Friday's payrolls update is even more
important than usual.
Before the Fed announcement, ADP releases its January private sector
employment readout for last month and markets will also scan the
December JOLTS job openings report.
In Asia, surveys showed the contraction in China's business activity
easing in January as the country opens up again after strict COVID
lockdowns. The speed of the pickup disappointed some, however, and may
in itself cool fears about the inflationary impact of China's sudden
return to business as usual.
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The U.S. Federal Reserve building is
pictured in Washington, March 18, 2008. REUTERS/Jason Reed
India's government unveiled one of its biggest jumps in capital
spending in the past decade in its annual budget and said the fiscal
deficit would fall, as it tries to create jobs while maintaining
financial discipline.
The news was less good for one of India's richest citizens.
Shares in tycoon Gautam Adani's conglomerate plunged again on
Wednesday as a rout in his companies deepened to $84 billion in the
wake of a U.S. short-seller report, with the billionaire also losing
his title as Asia's richest person.
While markets await the 'Triple-A' of Big Tech releases on Thursday,
Meta is due to report later today and the dour news from elsewhere
in the tech sector kept coming.
Overnight, Snap said current quarter revenue could decline by as
much as 10%, sending its shares down 14% as the company struggles
with weak advertising demand.
Intel said it had made broad cuts to employee and executive pay, a
week after the company issued a lower-than-expected sales forecast
driven by a loss of market share to rivals and a PC market downturn.
Key developments that may provide direction to U.S. markets later on
Wednesday:
* U.S. Federal Reserve policy decision, press conference with Fed
Chair Jerome Powell
* US Jan ISM manufacturing survey, ADP Jan private sector job
report, Dec JOLTS job openings report
* U.S. corp earnings: Meta Platforms, MetLife, Mckesson, Boston
Scientific, Otis Worldwide, Old Dominion, Align Technology, Corteva,
Thermo Fisher Scientific, Altria, Humana, Peleton etc
(By Mike Dolan, editing by Raissa Kasolowsky
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
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