Growing optimism in the markets and the first positive data regarding the lack of inflation growth may be setting investors up for a slowdown rather than a crisis scenario in the coming months. It seems that much may depend on the situation in the labour market.
Macroeconomic data
On Tuesday, we learned of Germany's CPI inflation reading, which came in at 10% (10.4% was expected). This is the third such reading in the last two months, which may suggest that this is already the peak of price dynamics in the German economy. On the same day, we learned the values of the Consumer Confidence index measuring consumer confidence in economic activity. The value here reached 100.2 points (100 points were expected). Despite the noticeable downward trend of this indicator since June 2021, it seems that consumers could still feel quite confident, given that at the beginning of the pandemic the values reached around 85 points.
On Wednesday, we learned the value of CPI inflation in the euro area, which was the same as in Germany at 10% (10.4% was expected). Annualised GDP in the United States came in at 2.9% q/q. (2.7% q/q. was expected.) Which means that if this pace were to continue for four consecutive quarters, GDP growth would be 2.9% annually. The number of new homes for sale in the US decreased by 4.6% m/m (a decrease of 5% m/m was expected). This is the 5th consecutive month of decline in sales in this market. The amount of change in the country's crude oil inventories came as a surprise. Stockpiles decreased by 12.58 million barrels (a decrease of 2.758 million b. was expected) Interestingly, this was the largest decline in a week since June 2019. At the very end, the Fed chairman's conference took place, after which markets started to make significant gains. The main S&P 500 index (US500) rose by more than 3%, which seems to have been a reaction to Jerome Powell's words about reducing the pace of interest rate hikes in the US.
Source: Conotoxia MT5, US500, Daily
On Thursday, we learned the values of PMIs for industry in Germany - 46.2 points (46.7 points were expected) and in the UK - 46.5 points (46.2 points were expected). The values of these indicators have been decreasing noticeably over the past months, but the current readings may indicate a halt or even a reversal of this trend. At the end of the week, we will find out what - and this seems particularly important - the scale of non-farm employment in the United States was.
Stock market
On Monday, we saw the Q3 report of Chinese e-commerce platform Pinduoduo (Pinduoduo), which reported its EPS of 8.62 (4.79 expected). The company also reported uninterrupted y/y revenue growth. since Q1 2019. Such positive data from the company appears to have made it the highest-growing company on the Nasdaq index (US100) since the beginning of the week.
Source: Conotoxia MT5, Pinduoduo, Weekly
US-based business financial software developer Intuit (Intuit) presented its quarterly report on Tuesday. Its earnings per share positively surprised analysts at 1.66 (1.19 was expected). The following day we saw a report from cloud-based customer relationship management software technology company CRM Salesforce (Salesforce), which reported EPS of 1.4 (expected 1.22). On the same day, we were also positively surprised by a report from an electrical design automation company. Its EPS was 1.91 (expected 1.85).
With the changing situation in China regarding pandemic concerns, Asian markets may have reacted positively to reports of a diminishing intensity of protests due to restrictions on the zero covid policy. This was seen, for example, following Tuesday's rise in the Hong Kong Stock Exchange (EWH), which gained over 5%.
Source: Conotoxia MT5, EWH, Daily
Currency and cryptocurrency market
Another week of US dollar weakness, the extent of which we could see on the index (USDindex). Its value has fallen by more than 1% since the start of the week. This weakening appears to be linked to optimism over falling inflation globally and the previously mentioned statements by the Fed chairman regarding a reduction in the level of interest rate increases.
Source: Conotoxia MT5, USDIndex, Daily
The most rising currency pair of the week is the New Zealand Solar to US Dollar (NZDUSD) pair, which rose by more than 2%. This is the 7th week of uninterrupted growth for this currency pair.
The cryptocurrency market seems to be showing the first signs of unwinding the declines and negative sentiment. The price of the largest cryptocurrency bitcoin (BTCUSD) has risen by more than 6% since the beginning of the week. However, we cannot yet say that the potential resistance at USD 18200 has been pierced.
Source: Conotoxia MT5, BTCUSD, H4
What can we expect next week?
Next week will begin with a meeting of the OPEC cartel regarding the decision on oil production volumes. It is therefore important to prepare for possible fluctuations in the price of this commodity. We will also learn the non-manufacturing PMI values for the UK and the US. Quite crucial seems to be the quarterly GDP reading in Japan (previously -0.3% q/q), which we will see on Wednesday. To end the week on Friday, we will learn the monthly change in PPI producer inflation, which was previously 0.2% m/m.
We're coming to the end of earnings season, so on Tuesday we'll see the Q3 report from auto parts and accessories retailer AutoZone, whose projected EPS is 25.32 (previously 40.51). On Thursday, we will see the results of retailer Costco (Costco), for which projected EPS is 3.11 (previously 4.2). On the same day, semiconductor supplier Broadcom (Broadcom) will report, for which the EPS consensus is 10.28 (previously 9.78).
Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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