The markets have been dominated by the tragedy in Turkey caused by the biggest earthquake in a decade and speeches by the governors of the major central banks. We also seem to have entered the race for the best artificial intelligence. What else could we learn this week?
Macroeconomic data
We started Monday with reports from Turkey, which was hit by an earthquake. Every now and then we learn of more confirmed deaths, and the 7.8 magnitude quake severely damaged the country's energy infrastructure, including a major natural gas transmission line in the south-east of the country.
We could see the reaction to this event in Turkish equities, among others. The iShares MSCI Turkey ETF (TUR) has fallen by more than 12% since Monday, and the Istanbul Stock Exchange halted trading on Thursday.
Source: Conotoxia MT5, TUR, Weekly
On the same day, we learnt about the economic sentiment reading of the UK manufacturing PMI. It fell to 48.4 points (49.6 points were expected) against the previous reading of 48.8 points. A positive surprise came from the same indicator for Canada, where the reading clearly beat analysts' expectations, rising to 60.1 points (forecast 42.3 points) against the previous reading of 49.3 points. We ended the day with a speech by Christine Lagarde, President of the ECB, who stressed the need to stick to the course of rate rises in the euro area.
Tuesday began with a new short-term energy outlook report from the EIA. The agency revised its energy price forecasts, assuming that prices, particularly oil, would remain relatively unchanged, with Brent crude averaging $83.6 in 2023. On the same day, Jerome Powell, head of the Federal Reserve, conveyed in a speech that inflation was slowing in the US, but warned that further interest rate rises were still likely. India's central bank behaved similarly to the Fed, raising interest rates by 0.25 percentage points at the end of the day to 6.5%.
Source: Conotoxia MT5, XBRUSD, Daily
On Wednesday, we learnt about the NBP's decision on interest rates, which have remained unchanged at 6.75% since September 2022. It seems that we are dealing with a continuation of the 'wait and see' strategy. President Adam Glapinski told a press conference that inflation is being brought down by the action of interest rate rises. The global economy is weakening, but in Poland the government is doing everything it can to ensure that the prices of necessities of life rise as slowly as possible. The President of the NBP stressed that the risk of gas shortages has decreased in Europe, which further helps in the fight against inflation. He further added that price dynamics will start to decline from March.
Thursday brought us the January CPI inflation reading from Germany. It turned out to be lower than analysts' consensus, at 8.7% (8.9% was expected). This appears to be a temporary slowdown in the decline in price growth for this economy. On the same day, we learnt the number of new US unemployment claims filed. There were 196,000 (190,000 had been expected). The number of registered unemployed in the US is now the lowest since 2000.
Source: Fred
The stock market
Despite the extremely hawkish approach of central banks, investors appear to be ignoring announcements of further interest rate rises. The S&P 500 Index (US500) remains above the 4100 level, with the technology companies sector gaining the most in the week ending. The Technology Select Sector SPDR Fund (XLK) listings rose by more than 1%. This may have been influenced by the firing of valuations of companies that may be linked in some way to artificial intelligence after the market turmoil created by ChatGPT.
Source: Conotoxia MT5, XLK, Daily
The largest - around 4% - was lost by the telecommunications services sector.
The Q4 2022 report was presented by Activision Blizzard (Blizzard), one of the largest computer game developers. The data positively surprised analysts, beating their profit forecasts by 23%.
Source: Conotoxia MT5, Blizzard, Daily
On Wednesday, the company Disney (Disney) reported, which also beat earnings forecasts by 25%. Despite this, the shares traded down to pre-report levels after opening on a strong positive note.
Źródło: Conotoxia MT5, Disney, Daily
Thursday brought us a report from, among others, beverage producer PepsiCo (Pepsi). Here, the Q4 financial result was 1% better than analysts' forecast, as was the case for medical company and drug and vaccine manufacturer AstraZeneca (Astra).
Source: Conotoxia MT5, Pepsi, Daily
The week cannot be considered a success for investors in Google (Alphabet) and Amazon (Amazon), whose shares slumped by more than 12%. The former's declines in particular appear to have been caused by mounting pressure from rival Microsoft (Microsoft), which is implementing artificial intelligence from the makers of ChatGPT into its browser.
Source: https://finviz.com/map.ashx?t=sec&st=w1
Currency and cryptocurrency market
In the foreign exchange market, we could see relatively limited volatility despite numerous speeches by central bank governors.
The EUR/USD quotation, after a correction from 1.1 to 1.07, does not yet appear to have broken its upward trend. It is worth remembering that, despite lower interest rates in the euro area today, inflation is significantly higher than in the United States. The other major currency pairs appear to remain in their unchanged trends.
Source: Conotoxia MT5, EURUSD, Daily
The cryptocurrency market may have punctured its support levels, falling more than 6% since the start of the week and dragging ethereum down by 7%. It appears that despite the increases over the past month, no new money has been added to this market. The stablecoin market capitalisation fell by 0.8% m/m, however, which is the smallest decline in 12 months.
Source: Conotoxia MT5, BTCUSD, Daily
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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