The news shaping the markets today

Peru’s central bank announced plans to increase its policy rate by 50 basis points to 3.5% at its February meeting, raising rates for the seventh straight month. The news sent the PEN/USD forex pair sharply higher.

New Zealand’s BusinessNZ Performance of Manufacturing Index fell to 52.1 in January, versus 53.8 in the previous month, exerting pressure on the NZD/USD pair in forex trading this morning.

Belgium’s industrial production surged 12.5% from a year ago in December, versus an 8.5% rise in the previous month. Despite this, the EUR/USD forex pair remained under pressure.

Mexico’s central bank increased its benchmark policy rate by 50 basis points to 6% at its recent meeting. However, the MXN/USD pair declined in forex trading this morning.

The US reported a budget surplus of $119 billion for January, swinging from a $162.8 billion gap in the same period last year. However, the Dow Jones index tumbled by more than 500 points on Thursday.

What’s happening: Both Coca-Cola Company and PepsiCo reported better-than-expected sales and earnings for the fourth quarter on Thursday.

What happened: Shares of Coca-Cola rose but PepsiCo declined after their fourth-quarter print, despite both companies reporting upbeat earnings, driven by a sharp increase in demand and higher prices.

However, the world’s two leading beverage companies reported a decline in one of the important metrics.

How were the results: Both the soda giants reported double-digit growth in sales for the fourth quarter and topped market expectations.

• What’s happening: Both Coca-Cola Company and PepsiCo reported better-than-expected sales and earnings for the fourth quarter on Thursday.
• What happened: Shares of Coca-Cola rose but PepsiCo declined after their fourth-quarter print, despite both companies reporting upbeat earnings, driven by a sharp increase in demand and higher prices.
• However, the world’s two leading beverage companies reported a decline in one of the important metrics.
• How were the results: Both the soda giants reported double-digit growth in sales for the fourth quarter and topped market expectations.

Why it matters: Last year both PepsiCo and Coca-Cola saw a significant rise in overall costs, with a jump in can prices, wages and shipping costing due to supply chain issues around the world amid the covid-19 pandemic. The higher costs forced companies across the packaged food industry to hike prices of their products.

PepsiCo CFO Hugh Johnston said prices may be increased again later this year in case of a higher-than-expected rise in costs. Coca-Cola also warned of pressure on earnings this year due to an increase in costs.

For the fourth quarter, Coca-Cola reported volume growth across its products, including sodas, sports drinks, juices, and plant-based beverages with consumers beginning to go out. Unit case volumes grew 9% in the quarter and 8% for the year.

Both cola makers reported a contraction in operating margins. Coca-Cola’s adjusted operating margins shrank to 22.1% in the fourth quarter, from 27.3% in the year-ago period. PepsiCo’s operating margins declined 244 basis points to 10.1% in the quarter.

Pepsico announced a 7% rise in its annualised dividend to $4.60 per share and a new share buyback program of up to $10 billion of its common stock.

Coca-Cola guided to growth in adjusted earnings of 5% to 6% from $2.32 per share in the previous year, versus market expectations of 6% growth. The company also projected organic revenue growth of 7% to 8% for fiscal 2022.

PepsiCo projected fiscal 2022 core earnings of $6.67 per share, short of market views of $6.73 per share. Management also guided to 6% growth in organic revenues for the year.

How shares responded: Following the release of quarterly results, Coca-Cola’s shares gained 0.6% to close at $61.38, while PepsiCo’s stock declined 2.1% to settle at $168.37 on Thursday.

What to watch: Markets will focus on the profit margins of both companies, as costs continue to rise due to supply concerns.

The markets today

The British pound will be in focus today ahead of a basket of economic reports from the UK

Context: The GBP/USD forex pair edged higher on Thursday, following inflation data from the US.

Details: Market experts said they expect the Bank of England to continue raising interest rates at its upcoming meetings, following its second rate-hike since the onset of the pandemic.

The central bank’s monetary policy committee increased its policy rate for the second time in three months to 0.50% in an attempt to contain inflation. Experts expect a rate hike of 25 basis points in March.

Official figures from the US showed a surge in CPI inflation to 7.5% year-on-year in January, up from December’s 7.0%. The figure also came in higher than the market expectations for 7.3%. Consumer prices rose 0.6% on a monthly basis, while core CPI rose 6.0% year-on-year in January.

The US dollar climbed initially following the latest inflation reading but declined later in the session. Markets expect the US Federal Reserve to raise rates five times in 2022 due to the continued spike in inflation.

The GBP/USD forex pair settled at 1.3559 on Thursday. London’s FTSE 100 index closed higher by 0.38% at 7,672.40, extending gains for a second straight session to reach its highest level since January 2020.

What to watch: Traders await the release of economic data on GDP growth, balance of trade and industrial production from the UK today. The UK, which posted a trade surplus of £0.63 billion in November, is expected to swung to a £3.1 billion deficit in December. The country’s economy is expected to grow by 6.4% year-over-year in the fourth quarter, down from 6.8% in the third quarter. Industrial production is projected to grow by 0.1% in December, following 1% growth in the previous month.

 Other Markets: US indices closed lower on Thursday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 1.47%, 1.81% and 2.33%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s inflation rate and wholesale price inflation, Turkey’s industrial production, retail sales, current account and car production, UK’s manufacturing output, goods trade balance, business investment, construction orders, factory activity and construction output, Central Bank of Russia’s interest rate decision, India’s value of deposits, foreign exchange reserves, value of loans, manufacturing production and industrial production, Spain’s consumer confidence indicator, Brazil’s IBC-Br index of economic activity, Mexico’s industrial production, Russia’s balance of trade and Central Bank of Russia’s press conference, US University of Michigan consumer sentiment, Fed monetary policy report and Baker Hughes crude oil rigs, as well as China’s total vehicle sales.