The news shaping the markets today

Russia intensified its assault in eastern Ukraine, bringing in tens of thousands of troops to the region. WTI crude oil rose by 0.17% this morning.

Russia’s foreign exchange reserves grew to $597 billion in January, from $581 billion in the previous month, lending support to the RUB/USD forex pair.

The US total consumer credit rose $11.65 billion in December, after a rise of $27.96 billion in the previous month. However, the figure missed market expectations of a $25 billion rise. The US dollar index came under pressure after the news.

Japan’s current account surplus narrowed sharply to ¥33.4 billion in December, from ¥1,803.6 billion in November. The figure also missed the consensus estimates of ¥98.4 billion, sending the JPY/USD pair lower in forex trading this morning.

Indonesia’s consumer confidence climbed to 123.0 in January, from 119.9 in the previous month. This being the highest level since August last year lent support to the IDR/USD forex pair.

What’s happening: Shares of Baidu jumped on Tuesday, after the company revealed plans to launch an AI-powered chatbot.

What happened: The Chinese search engine giant unveiled Ernie, the AI chatbot it claims to have been working on since 2019.

Baidu joined other major tech companies, including Google and Microsoft, to bring this so-called generative AI into the spotlight.

Why it matters: The new gen chatbots are based on generative AI, a technology that can generate conversational text, create images according to instructions and more. Using NLP (natural language processing) technology, these chatbots are designed to generate text as though it is written by a human.

AI-powered chatbots came into the limelight in November 2022, with OpenAI releasing ChatGPT to the public. The chatbot soon gained immense popularity, prompting Microsoft to invest $10 billion in its further development.

ChatGPT is especially popular among Millennials and Gen Zs, who have started using this technology to search for information, posing a threat to the business model of search engine giants like Google and Baidu.

Google said on Tuesday that its AI-powered chatbot named Bard is being privately tested and should be launched for more broader use over the next few weeks. Baidu also entered the arena with its own offering, which it calls Ernie, short for “Enhanced Representation through Knowledge Integration.”

Baidu said it had been working on this breakthrough AI innovation since 2019. The company also mentioned that Ernie Bot has massive stores data, which increases the value of any AI-powered chatbot.

Both Google and Baidu aim to integrate their chatbots with their search engines to enhance the response to queries.

How shares responded: Shares in Baidu jumped more than 13% in the Hong Kong stock exchange, reaching their highest level in around a year.

What to watch: Investors await the launch of Google’s Bard, which is expected to handle more complex conversations, like suggesting meal options based on what is in the fridge. Markets will keep a close eye on any Ernie related news, with Baidu saying it should be able to launch the chatbot in March.

The markets today

The US dollar will be in focus today ahead of the initial jobless claims report

Context: The US dollar index climbed in early trading on Tuesday, but pared all its gains to end lower.

Details: Job growth in the US accelerated sharply in January. The US economy added 517,000 jobs in the month. The figure was significantly higher than both the 223,000 job adds announced for December as well as the consensus estimate of 185,000 job adds.

A strong labour market increases speculations of the Federal Reserve continuing with its aggressive rate hike measures to combat inflation.

Fed Chairman Jerome Powell said during his speech that the central bank plans further rate hikes and that the rates will need remain elevated for some time to get inflation back on track at the target of around 2%.

The US dollar made strong moves against major currencies on Tuesday, especially against the Australian dollar and the Japanese yen. However, the greenback pared gains towards the latter half of the trading session. The US dollar index, which measures the greenback’s performance versus a basket of currencies, declined by 0.11% to close at 103.32 on Tuesday.

What are expectations: Investors await US jobless claims data, scheduled for release later today. The number of people filing initial claims for unemployment benefits fell by 3,000 to 183,000 in the week ending January 28, hitting the lowest since April. The figure had also come well below market expectations of 200,000. For the latest week, experts project initial jobless claims of 190,000.

Other Markets: European indices closed mixed on Tuesday, with Stoxx 600, IBEX 35, and FTSE 100 up by 0.23%, 0.14%, and 0.36%, respectively, and the DAX 30 and CAC 40 down by 0.16% and 0.07%.

Support & resistances for today

Market snapshot

What else to watch today

France’s non-farm payrolls, Italy’s retail sales, US MBA 30-year mortgage rate, MBA purchase index, wholesale inventories and 10-year note auction, Russia’s inflation rate, unemployment rate, retail sales, real wage growth, business confidence, corporate profits and GDP, Canada’s 2-year bond auction and the EIA’s refinery crude runs change.

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