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European stocks rise as earnings season begins

 

Thursday, January 12, 2023, 8.45am GMT

The news shaping the markets today

Ukraine’s President Volodymyr Zelenskyy said that fighting continued in the eastern Ukrainian city of Soledar, while Russia’s mercenary group Wagner had earlier claimed it had taken control of the region. Despite the ongoing tensions, the safe-haven US dollar index traded slightly lower this morning.


China’s annual inflation rate accelerated to 1.8% in December, from November’s eight-month low of 1.6%. However, the latest reading came in-line with market estimates, lending support to the CNY/USD forex pair.


Japan recorded a current account surplus of ¥ 1,803.6 billion in November, exceeding the consensus estimate of ¥471.1 billion, which sent the JPY/USD pair higher in forex trading this morning.


Australia’s trade surplus widened to A$13.20 billion in November, from A$12.74 billion in the previous month. The latest reading also exceeded market expectations of A$10.5 billion, lending support to the AUD/USD forex pair.


New Zealand’s building permits rose 7% to 4,099 in November, versus an 11% decline in the previous month, which sent the NZD/USD pair higher in forex trading this morning.

 

What’s happening: European stocks recorded gains on Wednesday, continuing the uptrend of the previous trading session.

What happened: Investors in Europe assessed quarterly results from major companies, focusing mainly on the retail stocks.

Market participants are also awaiting inflation data from the US today to get more insights into the Federal Reserve’s monetary policy path.

Why it matters: European stocks cut back losses on Tuesday with markets expecting softer inflation data from the US and Fed Chief Jerome Powell not making any comments around the central bank’s monetary policy during his speech to Sweden’s Riksbank.

The STOXX Europe 600 index has climbed around 5.4% year-to-date, driven by a sharp decline in natural gas prices amid warmer weather and latest reports signalling a milder-than-projected recession in the Eurozone.

US jobs data released last week also showed signs of slowing wage growth, which triggered speculations of less aggressive policy tightening by the Fed.

European companies started rolling out earnings on Wednesday. J Sainsbury said it sees profits at the higher end of its projected range for the year. However, the stock edged lower, despite the company reporting record Christmas sales.

JD Sports Fashion’s shares gained 7% after the company said it expects profits to surpass £1 billion for the first time next year, after recording over 20% growth in festive sales. Shares of Denmark’s Jyske Bank shares climbed to a record high after management raised their outlook for the full year.

However, Direct Line Insurance Group’s stock fell more than 26%, after the British company surprisingly scrapped its 2022 final dividend.

The STOXX Europe 600 index gained 0.38% to 447.41 on Wednesday, with most sectors being in the positive zone. Retail stocks were the top performers, gaining 2%, while insurance stocks fell around 1% during the session.

Germany’s DAX 40 gained 1.17%, while France’s CAC 40 added 0.80%. UK’s FTSE 100 index climbed to its strongest level in over four years amid gains in oil majors and mining stocks.

What to watch: Markets will keep an eye on US inflation data today, with the annual inflation rate in the country expected to ease for a sixth consecutive month to 6.5% in December, from 7.1% in the previous month.

Data on balance of trade and industrial production from the Eurozone, scheduled for release on Friday, will also remain in focus.

The markets today

Bitcoin will be in focus after recording gains on Wednesday

Context: Bitcoin prices extended gains and surpassed the key $18,000 level this morning, ahead of US inflation data.

Details: The cryptocurrency market has been on a broad uptrend, with little signs of slowing and Bitcoin continuing its rebound from the beginning of the year.

The world’s most valuable cryptocurrency gained around 10% since the first trading day of 2023, after a negative close to the previous year.

Crypto traders eagerly awaited US CPI data, with any further easing in the inflation rate likely to slow down the Fed’s rate hikes this year.

The global crypto market cap grew sharply to $887.60 billion this morning. Avalanche was among the top performer in the past 24 hours, gaining more than 27%. Bitcoin prices climbed around 3.7% in the same timeframe to trade close to $18,200 this morning. Ethereum, the second-most valued cryptocurrency in the world, rose around 4.3% to $1,400.

What are expectations: Traders will continue monitoring comments from Fed officials regarding future rate hikes, which could provide further direction to cryptocurrency prices this week.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.80%, 1.28% and 1.76%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 131.66 and 131.81 Negative
USD/CAD – 1.3425 and 1.3432 Positive
NZD/USD – 0.6371 and 0.6377 Positive
Gold   – 1884.10 and 1886.30 Negative
Copper – 4.1490  and 4.1693 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0769, 0.11%) Dow ($34,096, -0.04%) Brent ($82.90, 0.3%)
GBP/USD (1.2163, 0.12%) S&P500 ($3,989, -0.04%) WTI ($77.62, 0.3%)
USD/JPY (131.55, -0.71%) Nasdaq ($11,465, -0.10%) Gold ($1,887, 0.4%)

What else to watch today

Turkey’s retail sales and foreign exchange reserves, India’s money supply M3, industrial production, manufacturing output and retail price inflation, US Initial jobless claims, continuing jobless claims, natural gas stocks change and government budget, Germany’s current account, Brazil’s industrial entrepreneur confidence index, China’s total vehicle sales, as well as Argentina’s inflation rate.

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