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US stocks end higher after Fed minutes

 

Thursday, January 05, 2023

The news shaping the markets today

France’s President Emmanuel Macron told Ukraine’s President Volodymyr Zelenskyy that his government would send light combat vehicles to help the country in its ongoing war against Russia. The news sent WTI crude oil prices higher this morning.


China’s general services PMI rose to 48.0 in December, from November’s six-month low of 46.7, lending support to the CNY/USD forex pair.


Hong Kong’s S&P Global PMI rose to 49.6 in December, from 48.7 in the prior month. The country’s private sector remaining in the contraction zone sent the HKD/USD pair lower in forex trading this morning.


Singapore’s S&P Global PMI fell to 49.1 in December, from 56.2 a month ago, signalling the first contraction in the private sector since November 2020. The news exerted pressure on the SGD/USD forex pair.


Australia’s Judo Bank services PMI fell to 47.3 in December, from 47.6 in the previous month, sending the AUD/USD pair lower in forex trading this morning.

 

What’s happening: US stocks closed higher on Wednesday, following the release of FOMC minutes from the December 13-14 meeting.

What happened: Markets in the US started the session on an upbeat note as investors monitored economic reports.

Although stocks turned lower on growth concerns, markets soon recovered losses after the Fed minutes.

Why it matters: Wall Street had begun the new year on a negative note on Tuesday amid concerns of rising interest rates impacting economic growth. The major US indices came under pressure with steep declines in the stocks of Apple and Tesla.

The minutes from the Federal Reserve’s latest meeting showed officials suggesting further rate hikes to curb inflation, which is well above the central bank’s 2% target. None of the Fed policymakers projected rate cuts in 2023.

The Federal Reserve had increased the fed funds rate by 50bps to 4.25%-4.5% at its final policy meeting of 2022, sending borrowing costs to the highest levels since 2007.

Investors also assessed data released on Wednesday, which showed JOLTS numbers coming in slightly better than expected, signalling continued strength in the country’s labour market.

The number of job openings fell slightly by 54,000 to 10.5 million in November, versus the consensus expectations of 10 million. The ISM manufacturing PMI for the US declined to 48.4 in December, coming in below the consensus estimates of 48.5, signalling a contraction in factory activity for the second month in a row.

Shares of GE HealthCare Technologies gained 8% on Wednesday, on its first trading day after General Electric completed the separation of its healthcare business.

The Dow Jones index gained 133.40 points, or 0.40%, to close at 33,269.77 on Wednesday. The S&P 500 rose 0.75% to 3,852.97, while the Nasdaq 100 climbed 0.48% to close at 10,914.80.

What to watch: Investors await economic reports on balance of trade, jobless claims and services PMI data from the US today. The US trade gap, which widened to a four-month high of $78.2 billion in October, is expected to narrow to $72 billion in November. The number of Americans filing new claims for jobless benefits had risen by 9,000 to 225,000 in the week ending December 24 and is projected to rise to 230,000 in the latest week. Analysts expect the services PMI to decline to 44.4 in December, from 46.2 in the prior month.

The markets today

The British pound will be in focus today, ahead of a basket of economic reports

Context: The British pound recorded gains against a weakening US dollar on Wednesday.

Details: China’s State media played down the severity of an increase in covid-19 cases in the country, with the relaxation of restrictions. The reopening of China raised the demand for riskier currencies like the sterling.

A decline in the US dollar also supported the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, shed around 0.3% to 104.25 on Wednesday.

Cooler-than-expected inflation data from Germany fuelled hopes of the ECB being less aggressive in its policy tightening, which also provided support to the British pound.

On the economic data front, consumer credit in the UK rose by £1.507 billion in November, while mortgage lending rose to £4.4 billion, compared to a one-year low of £3.6 billion in the prior month. Mortgage approvals fell to 46,100 in November, from 57,900 in the prior month.

The GBP/USD forex pair climbed around 0.7% to $1.2054 on Wednesday, after declining by more than 1% on Tuesday, its weakest level since end-November.

London’s FTSE 100 gained 0.41% to settle at 7,585.19, while the domestically focussed FTSE 250 index surged 1.34% to 19,391.07.

What are expectations: Traders await the release of economic data on services PMI, composite PMI and new car registrations from the UK today. The S&P Global/CIPS services PMI is expected to increase to 50.0 in December, from 48.8 in the prior month, while the composite PMI is projected to climb to 49.0 in December, from 48.2 in November. New car registrations in the UK, which had surged by 23.5% year-over-year to 142,889 units in November, are expected to grow by 22% in December.

Other Markets: European trading indices closed higher on Wednesday, with the DAX 40, CAC 40 and STOXX Europe 600 up by 2.18%, 2.30% and 1.38%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0612 and 1.0623 Negative
EUR/JPY – 140.04 and 140.23 Positive
Silver – 23.902 and 23.957 Positive
Platinum   – 1090.26 and 1094.56 Negative
FTSE 100 – 7574.65 and 7585.44 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0615, 0.08%) Dow ($33,322, -0.28%) Brent ($78.63, 1%)
GBP/USD (1.2048, -0.05%) S&P500 ($3,863, -0.30%) WTI ($73.68, 1.1%)
USD/JPY (132.14, -0.37%) Nasdaq ($10,952, -0.43%) Gold ($1,860, 0.1%)

What else to watch today

Germany’s balance of trade, new car registrations and construction PMI, South Africa’s S&P Global PMI and total vehicle sales, Brazil’s IPC-Fipe inflation and industrial production, Eurozone’s construction PMI and producer prices, France’s construction PMI, Italy’s construction PMI and consumer price index, Turkey’s gross foreign exchange reserves, Mexico’s consumer confidence indicator and monetary policy meeting minutes, Spain’s industrial confidence indicator and consumer confidence indicator, US Challenger job cuts, ADP employment change, natural gas stocks change, gasoline stocks, crude oil stocks change and distillate stocks, Canada’s balance of trade, as well as Argentina’s industrial production.


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