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European stocks begin week on a positive note

 

Tuesday, January 17, 2023

The news shaping the markets today

The death toll from the Russian attack on a nine-story apartment building in the central Ukrainian city of Dnipro increased to 40, with rescuers still searching the rubble for more missing people. The ongoing war sent the safe-haven US dollar index higher this morning.


China’s retail trade declined by 1.8% year-over-year in December, compared to a 5.9% contracting in the previous month. The country’s retail sales falling for the third straight month exerted pressure on the CNY/USD forex pair.


Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment rose 5% to 84.3 in January, increasing for the second month in a row, which sent the AUD/USD pair higher in forex trading this morning.


Ireland’s trade surplus widened to €5.5 billion in November, from €5.2 billion in the year-ago period, lending support to the EUR/USD forex pair.


India’s trade deficit increased to $23.76 billion in December, from $21.68 billion in the year-ago month, which sent the INR/USD pair higher in forex trading this morning.

 

What’s happening: European stocks recorded gains on Monday, while trading volumes remained light in the US.

What happened: Markets in Europe started the week on a positive note following the release of major data from Germany.

Investors will focus on the World Economic Forum this week, with some key dignitaries likely to attend the conference after remaining absent for three years due to the pandemic.

Why it matters: Trading volumes remained light on Monday, as markets in the US were closed for the Martin Luther King Jr. Day holiday.

Investors assessed the release of data from Germany, which showed wholesale prices falling 1.6% in December. On the year, wholesale prices in the country rose by 12.8%, recording the softest increase since August 2021, compared to a 14.9% gain in November.

Optimism around China’s reopening after the country’s government relaxed covid restrictions also provided support to market sentiment on Monday.

The World Economic Forum returns to Switzerland this week, with some key dignitaries, including ECB President Christine Lagarde and Germany’s Chancellor Olaf Scholz expected to attend. The ongoing war between Russia and Ukraine, economic uncertainty and climate change will be among the key themes for delegates to discuss at the meeting.

Major companies are scheduled to release their results as the week progresses. Shares of ITM Power plc fell around 12% on Monday, after the UK-based company warned of a wider loss and lower sales in the current fiscal year.

The STOXX Europe 600 index extended gains for the year to reach a new nine-month high, with the index settling higher by 0.46% at 454.63 on Monday.

Equities in the UK extended gains for the fourth session in a row, with the benchmark FTSE 100 index settling near record levels on Monday, amid gains in real estate and technology stocks. The FTSE 100 added 0.20% to settle at 7,860.07.

The Germany’s DAX 40 climbed 0.31% to trade above 15,134 for the first time since mid-February, while France’s CAC 40 index rose 0.28% to close at 7,043.31 on Monday, reaching the strongest level in over eleven months.

What to watch: The release of data on ZEW Economic Sentiment Index from the Eurozone and Germany will remain in focus on Tuesday. The ZEW Indicator of Economic Sentiment for the Eurozone had improved to -23.6 in December and is expected to increase further to -17 in January. Analysts expect the ZEW Indicator of Economic Sentiment for Germany to improve to -16 in January, from -23.3 in December. Investors also await inflation data from the Eurozone, due to be released on Wednesday.

Investors will also focus on the Bank of Japan’s policy meeting this week, after the central bank surprised markets last month by widening the tolerance range for its 10-year government bond.

The markets today

The Canadian dollar will be in focus ahead of a couple of major economic reports

Context: The CAD/USD forex pair traded mostly flat following the release of economic data.

Details: Data released Monday showed Canadian factory sales coming in flat for November, compared to a 2.4% increase in the previous month, as higher sales of durable goods were offset by lower sales of non-durable goods. Analysts were expecting a 0.5% increase in factory sales.

Canada’s business sentiment fell to its lowest level since the covid-19 pandemic, according to Bank of Canada’s survey.

The price of crude oil, one of Canada’s major exports, moved lower but remained close to this year’s highs amid the easing of covid-19 restrictions in China. US crude oil prices declined to around $79 per barrel on Tuesday.

The CAD/USD forex pair had added 0.3% last week, recording gains for the fourth consecutive week amid a sustained decline in US inflation.

Speculators have increased their bearish bets on the Canadian dollar to the highest level since August 2020, according to the US Commodity Futures Trading Commission’s data released on Friday.

What are expectations: Traders await data on housing starts and inflation rate from Canada today. Housing starts in Canada, which declined 0.2% to 264,159 units in November, are expected to decline further to 244,000 in December. Analysts expect Canada’s annual inflation rate to ease to 6.4% in December, from 6.8% in November. Canadian consumer prices are seen declining 0.3% in December.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.33%, 0.40% and 0.71%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0817 and 1.0826 Negative
USD/CHF – 0.9259 and 0.9270 Positive
WTI Crude Oil – 79.21 and 79.51 Negative
Gold   – 1910.69 and 1917.49 Positive
Nasdaq 100 – 11525.09 and 11550.48 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0826, 0.05%) Dow ($34,362, -0.16%) Brent ($84.62, 0.2%)
GBP/USD (1.2190, -0.05%) S&P500 ($4,005, -0.32%) WTI ($79.27, -0.7%)
USD/JPY (128.76, 0.15%) Nasdaq ($11,550, -0.50%) Gold ($1,913, -0.4%)

What else to watch today

Germany’s consumer prices, UK’s unemployment rate, employment change, claimant count change and average weekly earnings, Italy’s consumer price inflation, South Africa’s mining production, gold production and SACCI business confidence index, Canada’a foreign investment in securities, US NY Empire state manufacturing index, China’s foreign direct investment, as well as Indonesia’s value of loans.


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