Traders’ Diary: Everything you need to get ready for the week ahead
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Australian inflation rose to a 33-year high 7.8%, while New Zealand also registered a three-decade high of 7.2%.
Australia’s figure was less than the RBA prediction or 8%, but higher than economists’ consensus of 7.5%.
Price rises were broad-based, but food and energy were the main driver.
Dylan Zhang, ASX equities analyst at Stake, said the CPI figures will not come as welcome news for investors, who have enjoyed a new year rally based on cooling sentiment around inflation.
Zhang expects rate hikes to continue or even increase as a result.
“It’s likely we’ll see a 25bps hike at the next RBA meeting, but a 50bps hike is not unthinkable.”
Zhang believes most equity sectors are likely to stay negative, but it’s likely that recent gains for tech stocks will backtrack the most as a result of today’s report.
“With a bear market looking more sustained, volatility is almost guaranteed,” Zhang said.
These high numbers came at a time when economies are displaying a little more resilience.
“The US could achieve a soft landing, the Eurozone could avoid recession, the UK may not be in recession already, etc – meaning central banks may feel less pressured to ease up,” said OANDA analyst, Craig Erlam.
“It isn’t ideal,” he added.
The US economy is still dodging a recession, according to the latest GDP report which shows the US economy is still growing, but cooling to a 2.9% annual rate in Q4.
While personal consumption declined from 2.3% to 2.1%, the broad-based GDP was better than the 2.6% consensus estimate.
The US economy is supposed to be decelerating, but a lot of key data points like the weak jobless claims aren’t supporting that argument.
“It’s hard to have a recession when demand is this resilient, and that’s good news for a market that’s worried about the future of the economy,” said Callie Cox, US investment analyst at eToro.
Cox says strong spending and jobs market data do give the Fed some leeway to swing its hammer more this week.
She believes that at this point in time, it’s hard to know definitely how the markets will respond to headlines. Day-to-day swings could be based more on emotion and positioning than logical reasoning, she said.
“But for us, decent data is a reason to feel good about the future, and it may be a reminder to investors that some optimism is justified,” Cox added.
The Fed will announce its rates decision on Wednesday (US time).
Tesla posted strong record earnings and revenue beats in Q4, but the news was not all positive as it missed on free cash flow.
The EV giant reported Q4 profit of nearly $US3.7 billion, up 59% on the pcp.
In the earnings call, Elon Musk said, “It was our best year ever on every level.”
But he did acknowledge that “2022 was an incredibly challenging year”.
Airlines stocks also reported their earnings.
American Airlines posted better-than-expected profits by charging more on fares and capitalising on strong travel demand.
Southwest was crippled by the about 17,000 cancelled flights at year-end, while JetBlue’s profit was a beat.
Overall, the airlines industry still has strong demand with improving business travel, but the big question mark now is how quickly it will deteriorate as we potentially head towards a recession.
All sources from Investing.com
It will be a a quite week in Australia/NZ as we head into the following week’s RBA monetary policy meeting.
NZ exports/imports and trade balance
Private sector credit
Manufacturing index and PMI
NZ unemployment rate
NAB business confidence
It’s going to be a huge weekly calendar for worldwide markets, with the Fed interest rates decision due on Wednesday (US time) followed by the ECB rates decision on Thursday (EU time).
Equally as important is the US jobless rate on Friday, and the EU’s jobless rate on Wednesday.
EU consumer confidence
EU services and industrial sentiment
China composite PMI
China manufacturing PMI
Japan unemployment rate
US employment benefits
US house price index
US consumer confidence
US weekly crude stock
US Fed interest rates decision
US mortgage applications
US non-farm employment
US manufacturing PMI
US JOLTS jobs opening
US crude oil and gasoline inventories
EU manufacturing PMI
EU unemployment rate
ECB interest rates decision
US initial jobless claims
US factory orders
US unemployment rate
EU S&P PMI EU services PMI
China Caxin manufacturing PMI
According to the ASX, there are no companies scheduled to list this week.