After a week full of interest rate rises, it seems that markets may finally be catching their breath, or at least most of them. The exception may be Japan, where the central bank there has announced a turnaround in financial policy.
Macroeconomic data
Monday saw the publication of several important macroeconomic data, including the German Ifo Business Climate Index for December, the RBA meeting minutes, the PBoC Loan Prime Rate and a statement and the Bank of Japan. The German Ifo Business Climate Index is an important index that measures business sentiment in Germany. The reading for December was 88.6 points, which was better than expected (87.4 points) and may signal an improvement in business sentiment in Germany. The previous reading for November was 86.4 points. The result may indicate that the German economy is in better shape than expected and could be a positive signal for other economies in Europe.
The minutes of the RBA (Reserve Bank of Australia) meeting did not bring any surprises and contained no significant changes to the central bank's monetary policy, which is expected to continue to raise interest rates. The PBoC (People's Bank of China) interest rate remained at 3.65%, which was expected by the market. The Bank of Japan (BoJ) released its monetary policy statement and held a post-meeting press conference. The first steps were taken to tighten monetary policy, announcing a rate hike and increasing the level of government bond purchases. Because of this, the Nikkei index (JP225) may have fallen by more than 3% since the start of the week.
Source: Conotoxia MT5, JP225, Daily
On Tuesday, we learnt about the number of new building permits in the US, the reading for November was 1.342 million, worse than expected (1.485 million) and a decrease in permits compared to the previous month (1.512 million). The reading may indicate that the construction sector in the US is less active than expected, which could have a negative impact on the economy, potentially contributing to higher unemployment in the sector in the future.
Wednesday brought the publication of more data. We learned about Canada's core inflation reading (excluding food and energy prices). The reading for November was 0.0% m/m, while 0.2% m/m was expected. This represents no change in the price level compared to the previous month (0.4% m/m.).
On the same day, we learned the reading of the Consumer Confidence index, which measures consumer sentiment in the US. The reading for December was 108.3 points, which is better than expected (101.0 points) and represents an improvement in consumer sentiment compared to the previous month (101.4 points). This good result could be attributed to the pre-Christmas period. The last of the important publications concerned US crude oil inventories. The reading for last week was -5.894 million barrels (previously 10.231 million b.). Which could suggest a return to a further shortage of this crude.
On Thursday, we learned of signs of a slowdown in the UK economy. The GDP reading for the third quarter of this year was 1.9% y/y. (2.4% y/y was expected). This is down from the previous reading of 4.4% y/y.
Due to the holidays starting on Friday's session, some stock exchanges will close earlier than usual, which should be taken into account in investment intentions.
The stock market
Declines in most sectors in the US are unlikely to represent optimism about the 'Father Christmas rally' starting. We could see the largest in the new technology sector. TheTechnology Select Sector SPDR Fund (XLK), which tracks the sector's quotations, fell by 4.8%. Only the energy sector rose. This seems to have had something to do with rising energy commodity prices this week.
Source: Conotoxia MT5, XLK, Daily
This week gave us the last of this year's Q3 figures. Tuesday brought the release of financial results from Nike (Nike), the global footwear and apparel giant, among others. The company reported Q3 EPS of $0.85, better than expected ($0.65). Next is General Mills (GnrlMils), the food manufacturer reported EPS of 1.1, a reading that came as a positive surprise to analysts (1.06 was expected). Next is FactSet Research (FactSet), a data and analytics solutions company, reported Q3 earnings of 3.99 per share, 3.62 was expected.
On Wednesday, we learned the results of Micron (Micron), a computer memory manufacturer, which reported an EPS loss of 0.04 in Q3 (-0.01 expected). On the same day, Cintas (Cintas), an apparel services company, reported Q3 earnings per share of 3.12, expected (3.03). Carnival Corp (Carnival-US), the cruise company, reported a loss of $0.85 per share in Q3, better than expected (-$0.88).
Currency and cryptocurrency market
After a week of decisions by as many as 11 central banks, we saw numerous interest rate rises. These seem to have changed some global currency market trends. The EUR/GBP pair saw the biggest increase, up 1%, but we saw the biggest changes in pairs linked to the Japanese yen. The USD/JPY exchange rate has fallen by more than 3% over the course of this week and now stands at around 132. This is a drop of more than 13% from its peak, and appears to have been triggered by Monday's announcement of a change in monetary policy by the central bank of Japan.
Source: Conotoxia MT5, USDJPY, Daily
The cryptocurrency market has stagnated. The price of bitcoin (BTCUSD) was virtually unchanged over the course of this week, rising by just 0.3%. One of the strongest gaining cryptocurrencies was ethereum (ETHUSD), which increased in value by 2%. The digital currency market appears to continue to remain in its sideways course, showing no signs of changing.
It's time for Christmas to begin!
As we begin the festive period, we will not know any more key data until the end of the year, and the markets have to accept that this year would probably do without the usual 'Father Christmas rally' during this period. Nevertheless, we would like this period to be the best it can be for all of us.
The Conotoxia team sends its regards.
Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
