GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Borsa Istanbul 100 index traded around 5440 in the second half of January, close to last year's record highs. Investors continued to use stocks as a hedge against high inflation and a weak lira, and Turkish residents looked for assets to preserve their savings. However, in the first two weeks of the year, the benchmark stock index fell nearly 10% amid profit-taking, panic selling, and market-wide circuit outages, prompting authorities to monitor transactions and threaten criminal penalties to those who try to disrupt the functioning of the market. Nevertheless, the Borsa 100 index grew by almost 200% in 2022, with Turkish Airlines among the best performers (+448%). Meanwhile, the Turkish central bank kept its interest rate firm at 9% for the second time in January, marking the end of its rate-cutting cycle.

European shares fell more than 1% on Thursday from Wednesday's nine-month high after a six-day winning streak that ended the longest winning streak since November 2022. Investors had digested a slew of hawkish comments from corporate earnings and major central bankers, while weak U.S. economic data stoked fears of a potential global recession. On the corporate front, shares of Geberit and Boohoo came under pressure after disappointing results, while Dr Martens shares plunged more than 20% to record lows on a profit warning. In addition, HSBC downgraded Renault's stock rating from "buy" to "hold". On the policy front, ECB President Christine Lagarde reiterated that the central bank would keep raising rates until inflation returns to its 2% target "in time." At the same time, policymaker Knott said the market might be underestimating rate hikes from the eurozone central bank Investors should take its forecast of a 50 basis point rate hike more seriously. The FTSE MIB extended its early losses to below 25,700 on Thursday afternoon after rising for a sixth straight session, as investors reacted to a meeting by Christine Lagarde and other ECB policymakers at the World Economic Forum in Davos. Strong rhetoric in response. Sluggish corporate earnings, hawkish comments from Fed officials, and disappointing U.S. economic indicators the previous day also weighed on sentiment. On the corporate front, Tenaris was the biggest loser, down more than 4%, followed by Sinan, Pirelli, A2a, Sepem, Alcoa, and Enel, which fell more than 2%. However, Leonardo and Iveco Group both gained more than 1%. The CAC 40 index fell about 0.8% to 7,027 on Thursday, below an 11-month high hit in the previous session, amid growing signs of a global economic slowdown. Investors are also cautiously watching the World Economic Forum in Davos for more clues on the outlook for the worldwide economy and await a speech by European Central Bank President Christine Lagarde later in the day. Domestically, major unions' attention turned to a 24-hour strike today against President Macron's plans to extend the retirement age. ArcelorMittal and Renault fell 2.7% and 2%, respectively, after HSBC downgraded the carmaker's stock to "hold" from "buy." On the other hand, Pernod Ricard (1.2%) and Danone (0.9%) topped the list. The IBEX35 broke its 2-day rally to trade at 8800 on Thursday, pulling back from its 1-year high and following European peers on the downside, as investors followed Wall Street's downtrend and reacted to aggressive comments from major bankers. Data from the United States on Wednesday showed that the country's industrial production, producer prices, and retail sales collapsed more than expected in December. Today's focus shifts to key speeches by the Fed's Brainard and Williams and the ECB's Knot and LaGarde. Domestically, Spain started earnings season with Bankinter hitting its 2023 target a year early. However, the victories weren't enough to offset growing recession fears. Traders also became cautious, as RBC Capital Markets analysts cut the target price of Banco Santander stock to €3.60 from €3.75.

The Baltic Exchange's dry bulk shipping index, which measures the cost of shipping goods around the world, fell for the third consecutive session on Thursday, falling about 8.4% to a low of more than two and a half years of 801 points due to weak demand ahead of the Lunar New Year holiday in China. The Capesize index, which tracks iron ore and coal cargoes of 150,000 tons, slipped about 19.3% to a four-month low of 893 points; and the Panamax index, which tracks about 60,000-70,000 tons of cargoes of coal and grain, dropped 4 points to 1,071 points. Among smaller vessels, the supramax index saw its 20th consecutive day of declines, shedding 3 points to 654 points.

London shares fell for a third straight session on Thursday, dragged down by heavyweight materials and energy stocks, with the blue-chip FTSE 100 falling below 7,800. Weak U.S. economic data and hawkish comments from several Federal Reserve policymakers have fueled recession fears. On the domestic front, house prices fell further in December as rising borrowing costs and economic uncertainty dampened buyer demand and sales activity. Fresnillo and Glencore were the biggest laggards on the index, down 4% and 2%, respectively. Oil companies were also under pressure, with BP and Shell falling nearly 2%.

The Dow lost more than 200 points on Thursday, while the S&P 500 and Nasdaq 100 fell about 1% as investors fled stocks amid worries about a looming recession. The job market remained taut, with the number of Americans filing for unemployment benefits falling last week to a four-month low, throwing cold water on expectations that the Fed will back away from its hawkish stance. At the same time, recent data showed that retail sales, producer prices, and industrial production fell more than expected in December, exacerbating fears of a slowdown in the world's largest economy. Even after such disappointing data, the US central bank has kept its foot on the pedal, with Boston Fed Chair Susan Collins among the latest politicians to warn that rates must rise further to bring down inflation. 

The ruble-based MOEX Russia index fell more than 1% on Thursday, extending losses to a third session, dragged down mainly by losses in energy producers and banks. Russia has been selling its oil for around $50-$60 a barrel, well below global benchmark Brent, which fell 1.2% to $84 on Thursday. Moscow's energy sub-index is down more than 2% this year as Western sanctions have raised prices for ocean freight services and negatively impacted demand in top importers China and India. Falling oil revenues have already led the Kremlin to tap its $38 billion state welfare fund to fund its massive budget deficit on rainy days, an unprecedented move.

On Thursday, China Shanghai Composite rose 0.49% to close at 3,240 points. In comparison, the Shenzhen Composite rose 0.87% to close at 11,911 points, its highest level in four months. The outlook for China's economy improved after the index emerged from a dynamic clear zero policy. China's top economic official, Vice Premier Liu He, told the World Economic Forum in Davos that China's economy may rebound to pre-pandemic growth levels this year as coronavirus infections have passed their peak and consumption-related activities have slowed. Back to normal. Meanwhile, investors remained cautious ahead of the week-long Lunar New Year holiday as unexpected events could occur while markets are closed. Technology stocks and health care stocks led the gains, with East Money Information (3%), Shenzhen Infineon (4.9%), China Software (10%), Jiangsu Hengrui (5%), and Wuxi Apptec (2.9%) gaining strongly.
The Hongkong  Hang Seng Index fell 27.02 points, or 0.12%, to close at 21650.98 on Thursday, deviating from Wednesday's notable gains as disappointing U.S. retail sales and PPI data fueled concerns about growth prospects and corporate earnings, and Wall Street saw a pullback on Wednesday. Thanks to Country Garden Services (6.4%), Techtronic Industries (-5.4%), Xiaomi Corporation (-2.9%), Meituan (-2.5%), Fosun International (-1.5%), Li Auto (-0.9%) and Semiconductor Manufacturing international (-0.5%) losses, transport, retail trade, and transportation stocks mainly were down. Kuaishou Technology fell nearly 6%, its most significant drop in eight weeks after a major shareholder sold HK$3.78 billion shares.

The Nikkei 225 fell 1% to close at around 26,520, while overall, the Topix shed 0.9% to close at 1,918, snapping a two-day rally and gaining from Wall Street's negative lead. clues, as concerns about a global economic slowdown, outweighed optimism about a slowdown in the pace of central bank policy tightening. Investors also digested data showing Japan posted another trade deficit in December as imports rose more than exports. Japanese stocks rose sharply on Wednesday after the Bank of Japan kept interest rates ultra-low and kept yield controls on hold, defying expectations of another policy change. However, almost all sectors in Japan fell, with index heavyweights such as SoftBank Group (-2.8%), Toyota Motor (-2.1%), Tokyo Electron (-1.6%), Nintendo (-1.1%) and Mitsubishi Corporation (-1.2%) sharply fall.
The India BSE Sensex fell 190 points to close at 60,860 on Thursday, wiping out gains for the week and tracking losses on Wall Street overnight as investors digested a slew of U.S. economic data to hint at the Federal Reserve's guidance and growth for the world economy. prospect. Rate-sensitive automakers led losses in Mumbai, with Tata Motors down nearly 2 percent as Fed policymakers continued to back hawkish rhetoric. Meanwhile, Asian Paints fell more than 3% after missing its third-quarter profit target, mainly due to demand hits due to the monsoon. On the other hand, China's reopening continued to support base metals prices and lifted metallurgical stocks in India, with Tata Steel up nearly 1%.

On Thursday, the Australia S&P/ASX 200 rose 0.57% to 7,435, closing at its highest level in nearly nine months, as weaker-than-expected domestic employment data prompted traders to trim expectations for the pace of future rate hikes. Australia's employment rate unexpectedly fell in December, holding steady at 3.5% despite expectations for an increase to 3.4%. BHP Billiton Group (1.2%), Rio Tinto Group (3.3%), and Fortescue Metals (1.7%) led the gains. Financial firms also advanced, with the "big four" banks gaining between 0.1% and 1%. Elsewhere, technology, healthcare, gold, and lithium stocks also rose. In company news, Reuters reported that AGL Energy (-0.4%) named interim boss Damien Nicks as its permanent chief executive months after the generator's poor spin-off plans. They have forced its CEO and other top executives to resign.

New Zealand shares fell 37 points, or 0.31%, to close at 11,884 around midday on Thursday, reversing gains from the previous session, with the ANZ 50 hitting its highest level in more than nine months after weak economic data sparked a recession. Concerns followed Wall Street's negative lead on Wednesday. U.S. PPI and retail sales fell more than expected in December, while production of business equipment slumped, and a decline in factory output ended the weakest quarter for manufacturing since the outbreak. Meanwhile, hawkish comments from the Federal Reserve raised concerns about future U.S. rate hikes, even after further signs of economic weakness. Traders were also dismayed after new data showed New Zealand's annual food inflation rate hit its highest level in 32 years last month, with prices rising sharply across all categories. Electronic technology and energy mining led the gains, with leading gainers including Aofrio Ltd (2.5%), Ryman Healthcare (1.8%), Cannasouth Ltd (1.7%), Manawa energy (0.8%), and Mainforture Ltd (0.5%).

Brazil's Ibovespa stock index traded below the 112,000 level on Thursday, following two consecutive sessions of gains, drawing a negative mood in international markets amid renewed recession fears. Meanwhile, investors have been weighing Lula's comments on Brazil's central bank autonomy and fiscal stability. President Lula said in his first exclusive interview with GloboNews that the independence of the Central Bank of Brazil is "nonsense" and that the current inflation target, set by the National Monetary Council (CMN), hinders economic growth. On the domestic data front, Brazil's unemployment rate fell further to a 7.5-year low of 8.1% in the three months to November, in line with forecasts. On the corporate front, Brazil's Americans lost more than 27% after it said it was considering filing for bankruptcy after the retailer uncovered nearly $4 billion in accounting inconsistencies last week. Additionally, MRV and GOL posted steep losses, each down about 5%.

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most important data is:

- US: Preliminary estimates show that U.S. building permits fell 1.6% year-over-year to a seasonally adjusted annual rate of 1.11 million in December 2022, the lowest level since May 2020 and below the consensus estimate of 1.17 million. Licenses to act as future construction agents have declined as high inflation and rising mortgage rates hit demand for new housing. Single-family authorizations fell 6.5% to 730,000, the lowest level since April 2020, while volatile multi-sector authorizations rose 5.3% to 600,000. Permits declined in the South (-1.7% to 740,000), the Midwest (-15.6% to 1.68 million), and the Northeast (-2.5% to 115,000), but the West (9.3% to 3.07 million) rise.

- US: In the week ended January 14, the number of Americans applying for unemployment benefits fell by 15,000 from the previous week to 190,000, the lowest in four months and well below market expectations of 214,000. The result further cemented evidence of a tight labor market despite the Fed's aggressive tightening last year, challenging speculation that the central bank will stop tightening before reaching its final forecast rate of 5.25%. The 4-week moving average (which removes the week-to-week volatility) is down 6,500 to 206,000. On a non-seasonally adjusted basis, initial claims fell by 53,582 to 285,575, largely due to seasonal factors. Significant declines were seen in New York (-17.196), Michigan (-5540), and Georgia (-5072).

- US: In December 2022, U.S. housing starts fell 1.4% to a seasonally adjusted annualized rate of 1.182 million, the lowest level in five months but higher than the market forecast of 1.159 million. Starts for apartments with five or more units fell 18.9% to a rate of 463,000 units, while single-family apartment buildings rose 11.1% to 909,000 units. Starts were lower in the Midwest (-37.4%), West (-9.5%), and South (-4%) but were up 115.6% in the Northeast. Housing starts fell for the fourth straight month in December, pushing the decline to 3% in 2022, the first decline since 2009, as rising mortgage rates and inflation weigh on affordability.

- US: In December 2022, U.S. housing starts fell 1.4% to a seasonally adjusted annualized rate of 1.182 million, the lowest level in five months but higher than the market forecast of 1.159 million. Starts for apartments with five or more units fell 18.9% to a rate of 463,000 units, while single-family apartment buildings rose 11.1% to 909,000 units. Starts were lower in the Midwest (-37.4%), West (-9.5%), and South (-4%) but were up 115.6% in the Northeast. Housing starts fell for the fourth straight month in December, pushing the decline to 3% in 2022, the first decline since 2009, as rising mortgage rates and inflation weigh on affordability.

- CA: Canadian Wholesale Sales for November 2022 rose 0.5% month-over-month to $83.8 billion, revised from a preliminary estimate of a 1.9% increase, compared with a downwardly revised 1.9% gain in the previous month. Sales increased in the Motor Vehicles and Auto Parts & Accessories segment (10.1% to an all-time high of $11.8 billion) and the Machinery, Equipment & Supplies segment (2% to $17.9 million). Lower sales partially offset November's strong growth in the miscellaneous segment (-5.1% to C$12.2 billion). Four of the five industries posted sequential declines, but the fall was mainly in the agricultural supplies industry (-9.7% to $4.7 billion).

- EU: The accounts of the ECB's December policy meeting showed that some ECB policymakers had initially advocated a 75 basis point rate hike as inflation was expected to remain too high for too long, and the worsening outlook called for a larger walk than the market was pricing in. However, most members ultimately agreed to a small rate hike of 50 basis points on the condition that the central bank would commit to raising rates sharply and at a sustained pace to combat inflation amid uncertain economic conditions. Officials also noted that interest rates would be raised into restrictive territory if necessary and for longer than expected. The ECB has hiked interest rates by 250 basis points since the summer, and markets are already pricing at a peak rate of 3.2% by August 2023.

- IT: In November 2022, Italy's current account surplus was 446 million euros, a sharp decrease from 2.185 billion euros in the same period last year. Still, it was the second consecutive surplus after a series of unconventional current account deficits in 2022, as energy prices fell from annual peaks and limited the volume of commodity debits. As a result, the goods account surplus narrowed to 2.716 billion euros from 3.143 billion euros in the same period in 2021, while the services deficit widened to 2.08 billion euros from 1.703 billion euros, and the primary account surplus narrowed from 2.48 billion euros to 1.437 billion euros. On the other hand, the secondary account deficit fell from 1.734 billion euros to 1.627 billion euros.

- HK: Hong Kong's seasonally adjusted unemployment rate fell to 3.5% in the three months to December 2022 from 3.7% in September-November last year. It was the lowest unemployment rate in three months in January 2020, with the number of unemployed falling by 12,700 to 126,000, while the number of employed rose by 8,300 to 3,665,300. Unemployment fell in most sectors, notably consumption and tourism-related sectors; construction; transportation; and education. Looking ahead, the government noted that the labor market should continue to improve, supported by the lifting of most social distancing measures and the gradual resumption of normal travel in China. However, this may be partially offset by tightening financial conditions.

- CN: On Thursday, the People's Bank of China continued to inject liquidity into the financial system through open market operations. The People's Bank of China conducted a total of 532 billion yuan in reverse repos to the banking system, including 65 billion yuan for a 7-day term and 467 billion yuan for a 14-day term, with interest rates unchanged at 2% and 2.15%, respectively. The central bank said the move was aimed at keeping liquidity in the banking system reasonably significant, offsetting factors including government bond issuance payments and cash issuance ahead of the Lunar New Year, the central bank said, according to an online statement.

- AU: According to the Melbourne Institute, Australian consumer inflation expectations rose to 5.6% in January 2023 from 5.2% in December. However, a broad slowdown in expectations has been observed in recent months as consumers appear to be more comfortable with higher inflation. High-interest rates responded. Adjusted average inflation expectations have averaged 5.6% over the past three months, well below the June 2022 peak of 6.7%. Wage expectations also increased in January, with wage bills expected to rise 1.1% over the next 12 months, although confidence in future wage growth still showed no sign of a sustained rise.

- UK: 42% of respondents to the RICS UK Residential Market Survey in December 2022 reported rising house prices, the lowest level since October 2010, as higher borrowing costs and economic uncertainty dampened buyer demand and sales activity. The December data was also negative for the third consecutive month, with a net balance of -30%, which was lower than expected. Prices fell in all regions, with East Anglia and the South East seeing the most prominent net balances decline. Contracted sales also continued to weaken, with inquiries from new buyers falling slightly, and the number of homes for sale was the lowest since September 2021. RICS chief economist Simon Rubinsohn said the survey "highlights the challenges facing the housing market as new buyers grapple with more expensive financing conditions and an uncertain economic outlook."

- JP: Imports to Japan rose 20.6% year-on-year to 10,235.7 billion yen in December 2022, compared with market forecasts of 22.4% and a 30.3% rise in November. It was the 20th consecutive month of double-digit growth in inbound traffic and the slowest month since April 2021 due to sustained domestic demand, high commodity prices, and a generally weaker yen.

- JP: In December 2022, Japan's exports increased by 11.5% year-on-year to 8,787.3 billion yen. The market generally believed it was 10.1%, which increased by 20.0% in November. It was the 22nd straight month of growth in shipments. Still, the pace of growth was the slowest since January, with transportation equipment sales up 14.5%, led by motor vehicles (17.9%) and automobiles (18.1%), while machinery sales rose 11.2%, mainly from semiconductor machinery (9.2%). In addition, motor sales rose 6.1% due to semiconductors (0.4%); others (20.6%), led by scientific, optical instruments (0.6%); manufactured goods (8.3%), boosted by steel (3.7%); U.S. (16.9%), Taiwan (5.4%), South Korea (9.1%), Singapore (28.0%), Malaysia (8.6%), Indonesia (20.9%), Germany (4.9%), Australia (8.1%) and the European Union (27.0%) %); sales in China (-6.2%), Hong Kong (-0.7%) and Russia (-18.9%) declined. As a result, full-year shipment growth was 18.2%, down from 21.5% in 2021.

- SP: Spain's trade deficit fell to 3.31 billion euros in November 2022 from 4.21 billion euros in the same month last year. This was the smallest trade deficit since September 2021, as exports rose 23.3% from a year ago to an all-time high of €37.4 billion, supported by shipments of chemicals (67.5 %); capital goods (16.5%), food, beverages, and tobacco (7.9%); automotive products (32.1%) and energy products (33.3%). Among the main trading partners, overseas sales increased to the EU (32.4%) and the United States (25.3%) but decreased to China (-3.8%). Meanwhile, imports increased at a slower pace of 17.9% to 40.7 billion euros, reaching record highs in September, mainly thanks to the higher acquisitions of capital goods (20.3%); energy products (38.7%); chemicals (5.6%) and food, beverages and tobacco (26.2%). Among the top partners, imports from the EU increased (16.9%),

- SW: Swiss producer and import prices increased 3.2% year-over-year in December 2022, compared with a 3.8% increase in the previous month. It was the lowest producer and import price inflation since June 2021 due to the continued slowdown in import prices (4.4% versus 5.8%) and producer prices (2. 6% versus 2.8%). On a monthly basis, producer and import prices fell faster by 0.7% as pharmaceuticals became cheaper. Conversely, oil, natural gas, base metals, semi-finished metal products, chemicals, and metal products have become more expensive.

 

LOOKING AHEAD:

Today, investors should watch out for the following essential data:

- GBP: Retail Sales m/m.

- USD: FOMC Member Harker Speaks, Existing Home Sales, FOMC Member Waller Speaks, and FOMC Member Williams Speaks.

- CAD: Core Retail Sales m/m, and Retail Sales m/m.

- EUR: German PPI m/m, and ECB President Lagarde Speaks.

- CHF: SNB Chairman Jordan Speaks.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: Stock futures contracts tied to the three major indexes fell nearly 1% on Thursday, with Wall Street poised for sharp losses as investors fled stocks, fearing a looming recession. Data on Wednesday showed retail sales, producer prices, and industrial production fell more than expected in December, fueling fears of a slowdown in the world's largest economy. Meanwhile, the Fed shrugged off the dismal economic data, with St. Louis Fed President James Bullard and Cleveland Fed Presidents emphasizing the need to raise rates above 5% to bring inflation down to the 2% target. The focus now turns to the ongoing earnings season to get a sense of the health of corporate America. Netflix, Procter & Gamble, and Trust Financial were among the most notable names later in the day.

- FR: French 10-year bond yields hovered around 2.5%, remaining close to their lowest level since Dec. 14, as investors digested comments from the ECB's key policymaker on worries about a global economic slowdown and signs of easing inflationary pressures. ECB President Christine Lagarde warned that the central bank would keep raising interest rates until inflation reached its 2% target. However, markets may be underestimating the rate hikes planned by the European Central Bank, Knott said. Earlier this week, policy committee member Rehn said a sharp rate hike in the near term was justified to keep inflation expectations in check, while François Villeroy de Galhau said rates could peak in the summer. As a result, markets expect rates to peak at 3.2% by August 2023, down from a previous forecast of 3.5%. Elsewhere, weaker-than-expected U.S. economic data reinforced expectations that the Federal Reserve will continue to reduce the pace of tightening at its upcoming meeting.

- GE: Germany's 10-year bond yield hovered around 2%, near its lowest level since Dec. 14. Investors digested comments from major central bankers, while weaker-than-expected U.S. economic data reinforced expectations that the Federal Reserve will continue to reduce the pace of tightening at its upcoming meeting. In Europe, ECB President Christine Lagarde warned that the central bank would continue to raise interest rates and keep them within limits for as long as necessary to bring inflation down to its 2% target. A few hours earlier, Nott said that the market might be underestimating the eurozone central bank's plans to raise interest rates. Earlier this week, policy committee member Rehn said a sharp rate hike in the near term was justified to keep inflation expectations in check, while François Villeroy de Galhau said rates could peak in the summer. As a result, investors now expect the ECB's key interest rate to peak at 3.2% in August 2023, down from a previous forecast of 3.5%.

- US: U.S. 10-year Treasury yields, seen as a proxy for global borrowing costs, fell to around 3.3%, the lowest level since September 2022, amid fears of a sharp economic downturn and the U.S. Federal Reserve. The aggressive outlook then pushed up the appetite for government debt. Data on Wednesday showed Americans held back spending even as business investment fell, adding to concerns that the economy may be headed toward a recession. Meanwhile, producer prices have fallen by the most since the pandemic began, providing further evidence that inflation has peaked while giving the Fed room to ease monetary tightening. Money markets are now pricing in a near 95% chance that the U.S. central bank will raise rates by 25 basis points in February. Still, hawkish comments from several Fed policymakers underscored that the fight against inflation is far from over.

 

LEADING MARKET SECTORS:

Strong sectors: Communication Services, Health Care.

Weak sectors: Financials, Consumer Discretionary, Information Technology, Industrials, Materials.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- JPY: The yen rose to around 128 yen per dollar, back to its highest level in nearly eight months, as speculators doubled down on bets that the Bank of Japan will need to change policy soon. Markets are focusing on the possibility of action at the central bank's March policy meeting and April's policy meeting when the Bank of Japan's new governor takes office. The yen came under intense selling pressure earlier this week after the Bank of Japan kept interest rates ultra-low and its yield control policy on hold, defying expectations of another policy adjustment. The central bank kept its yield curve control target for short-term rates at -0.1% and the 10-year yield around 0%, as well as a 0.5% cap, as policymakers said they would not seek to Get out of massive stimulus now.

- USD: The dollar index steadied above 102 on Thursday after briefly falling to a seven-month low of 101.53 in the previous session, as investors digested weak U.S. data and hawkish comments from Federal Reserve officials. Fresh data showed U.S. retail sales fell more than expected in December, while U.S. producer prices fell by the most since April 2020, raising concerns about a potential slowdown. Meanwhile, Fed Chair James Bullard said interest rates were not yet capped and could rise to 5.5% by the end of the year, while Fed Chairs Loretta Mester and Patrick Harker also supported further hikes. The dollar came under pressure again this year as annual U.S. inflation slowed to 6.5% in December for the sixth straight month, the lowest level since October 2021, raising hopes that inflation peaked at 9.1% in June. The data bolstered expectations that the Fed would ease back to a modest hike of 25 basis points in February after raising rates by half a percentage point in December.

- NZD: New Zealand shares fell 34.77 points, or 0.3%, to 11,885.64 on Thursday, retreating from a more than nine-month high hit in the previous session after Prime Minister Jacinda Ardern announced she would resign ahead of a general election later this year. The leader mentioned that she has no energy or inspiration to seek re-election and will leave office by early February. Ardern has set the election date for October 14. U.S. stocks fell sharply on Wednesday after weak retail sales and producer prices, with traders also reluctant to enter new positions. According to local data, New Zealand's annual food inflation rate hit a 32-year high in December, driven by a surge in all types of food. Communications, consumer, and health tech stocks all ended in the red, with the worst performers including A2 Milk Co (-2%), Spark New Zealand (-1.2%), Fisher & Paykel (-1%), Mercury NZ Ltd. (- 0.8%) and Contact Energy (-0.6%).

- GAS: Gasoline futures continued their upward trend to $2.6 a gallon, their highest level in two months, following gains in other energy-related commodities on optimism about future fuel demand. On the supply side, OPEC and its allies agreed in December to maintain their policy of cutting oil production, capping global supplies by 2 million barrels a day through the end of 2023. Meanwhile, The latest EIA report showed that US gasoline inventories rose by 3.483 million barrels in the week ending January 13, compared with analysts' expectations of a build of 2.529 million.

- WET: Chicago wheat futures fell to $7.4 a bushel, approaching a 15-month low of $7.3 hit on Jan. 10 and following declines in other grains as rains at Argentina's top producer eased fears of drought and added to strong supply expectations from other producers. In Russia, industry research leader Sovecon has revised its shipment projections for the world's leading 200,000-ton exporter to 44.1 million for the current marketing year due to a record harvest and record inventories. Another major exporter, Australia, has also forecast its harvest to reach a historic 42 million tons over the same period. Finally, the expansion of farmland in India has raised expectations that the current harvest would set a record and lead to the lifting of the ban on wheat exports from New Delhi.

- WTI: WTI crude futures stabilized around $80 a barrel on Thursday, near levels not seen since early December, as investors became optimistic about a recovery in global demand. The International Energy Agency said with China moving away from its tough COVID-19 limits, demand for crude oil is likely to hit a new record this year. At the same time, cap price sanctions on Russia could affect the offer.OPEC echoed a similar view in its monthly report released earlier this week, saying demand for crude oil will rise by 2.22 million barrels per day (BPD), or 2.2%, in 2023. However, dismal US economic data, including the steepest declines in manufacturing output in nearly two years, stoked worries about a recession, dimming the prospects for such a rebound in demand.

- IRN: Prices for cargoes of iron ore with an iron ore content of 63.5% for delivery to Tianjin were $123 per ton, hovering relatively close to a seven-month high of $127 amid signs of tight supply and robust demand, as investors shrugged off further warnings that China's government would crack down on speculative pricing. According to the latest data, China's GDP and industrial production grew more than expected, signaling resilience to the country's strict lockdowns during the fourth quarter. Meanwhile, the boost to the economy caused by the increase in the zero Covid policy is expected to bolster credit health and stimulate demand for housing as commercial banks have opened new credit lines for developers. However, on the supply side, Q1 cyclones and mine maintenance programs threatened firm exports from Australia's top producer.

- TRY: The Turkish lira held a record low of 18.8 per USD in January after the TCMB kept its interest rate at 9% at its last meeting, it was previously reported. The decision marked the end of the central bank's easing cycle, which began after President Tayyip Erdogan lobbied the Monetary Policy Committee to cut unorthodox interest rates by ten percentage points starting in September 2021 to stimulate growth. and exports of the economy. The move caused the lira to slip 29% in 2022 and trade 55% below its pre-rate cut path levels, causing more expensive energy imports to lift the inflation to 86% in October. Moreover, the latest current account and trade-in goods deficits have widened significantly, contradicting Erdogan's pledge that Turkey would consolidate a strong surplus position.

 

CHART OF THE DAY:

Brent crude futures stabilized around $86 a barrel on Thursday, near levels not seen since early December, as investors became optimistic about a recovery in global demand. The International Energy Agency said with China moving away from its tough COVID-19 limits, demand for crude oil is likely to hit a new record this year. At the same time, cap price sanctions on Russia could affect the offer.OPEC echoed a similar view in its monthly report released earlier this week, saying demand for crude oil will rise by 2.22 million barrels per day (BPD), or 2.2%, in 2023. However, dismal US economic data, including the steepest declines in manufacturing output in nearly two years, stoked worries about a recession, dimming the prospects for such a rebound in demand.

 

 

- Brent crude oil - chart (D1), downtrend, Resistance (target zone) around ~ 89.733, Support (consolidation) around  ~ 79.309.

European stocks down from 11-month highs; Turkish stocks rebound to stay close to record levels; Turkish lira remains at a record low after the rate decision - keeps interest rate at 9% as expected; Brent crude hovers near $86

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Borsa Istanbul 100 index traded around 5440 in the second half of January, close to last year's record highs. Investors continued to use stocks as a hedge against high inflation and a weak lira, and Turkish residents looked for assets to preserve their savings. However, in the first two weeks of the year, the benchmark stock index fell nearly 10% amid profit-taking, panic selling, and market-wide circuit outages, prompting authorities to monitor transactions and threaten criminal penalties to those who try to disrupt the functioning of the market. Nevertheless, the Borsa 100 index grew by almost 200% in 2022, with Turkish Airlines among the best performers (+448%). Meanwhile, the Turkish central bank kept its interest rate firm at 9% for the second time in January, marking the end of its rate-cutting cycle.

European shares fell more than 1% on Thursday from Wednesday's nine-month high after a six-day winning streak that ended the longest winning streak since November 2022. Investors had digested a slew of hawkish comments from corporate earnings and major central bankers, while weak U.S. economic data stoked fears of a potential global recession. On the corporate front, shares of Geberit and Boohoo came under pressure after disappointing results, while Dr Martens shares plunged more than 20% to record lows on a profit warning. In addition, HSBC downgraded Renault's stock rating from "buy" to "hold". On the policy front, ECB President Christine Lagarde reiterated that the central bank would keep raising rates until inflation returns to its 2% target "in time." At the same time, policymaker Knott said the market might be underestimating rate hikes from the eurozone central bank Investors should take its forecast of a 50 basis point rate hike more seriously. The FTSE MIB extended its early losses to below 25,700 on Thursday afternoon after rising for a sixth straight session, as investors reacted to a meeting by Christine Lagarde and other ECB policymakers at the World Economic Forum in Davos. Strong rhetoric in response. Sluggish corporate earnings, hawkish comments from Fed officials, and disappointing U.S. economic indicators the previous day also weighed on sentiment. On the corporate front, Tenaris was the biggest loser, down more than 4%, followed by Sinan, Pirelli, A2a, Sepem, Alcoa, and Enel, which fell more than 2%. However, Leonardo and Iveco Group both gained more than 1%. The CAC 40 index fell about 0.8% to 7,027 on Thursday, below an 11-month high hit in the previous session, amid growing signs of a global economic slowdown. Investors are also cautiously watching the World Economic Forum in Davos for more clues on the outlook for the worldwide economy and await a speech by European Central Bank President Christine Lagarde later in the day. Domestically, major unions' attention turned to a 24-hour strike today against President Macron's plans to extend the retirement age. ArcelorMittal and Renault fell 2.7% and 2%, respectively, after HSBC downgraded the carmaker's stock to "hold" from "buy." On the other hand, Pernod Ricard (1.2%) and Danone (0.9%) topped the list. The IBEX35 broke its 2-day rally to trade at 8800 on Thursday, pulling back from its 1-year high and following European peers on the downside, as investors followed Wall Street's downtrend and reacted to aggressive comments from major bankers. Data from the United States on Wednesday showed that the country's industrial production, producer prices, and retail sales collapsed more than expected in December. Today's focus shifts to key speeches by the Fed's Brainard and Williams and the ECB's Knot and LaGarde. Domestically, Spain started earnings season with Bankinter hitting its 2023 target a year early. However, the victories weren't enough to offset growing recession fears. Traders also became cautious, as RBC Capital Markets analysts cut the target price of Banco Santander stock to €3.60 from €3.75.

The Baltic Exchange's dry bulk shipping index, which measures the cost of shipping goods around the world, fell for the third consecutive session on Thursday, falling about 8.4% to a low of more than two and a half years of 801 points due to weak demand ahead of the Lunar New Year holiday in China. The Capesize index, which tracks iron ore and coal cargoes of 150,000 tons, slipped about 19.3% to a four-month low of 893 points; and the Panamax index, which tracks about 60,000-70,000 tons of cargoes of coal and grain, dropped 4 points to 1,071 points. Among smaller vessels, the supramax index saw its 20th consecutive day of declines, shedding 3 points to 654 points.

London shares fell for a third straight session on Thursday, dragged down by heavyweight materials and energy stocks, with the blue-chip FTSE 100 falling below 7,800. Weak U.S. economic data and hawkish comments from several Federal Reserve policymakers have fueled recession fears. On the domestic front, house prices fell further in December as rising borrowing costs and economic uncertainty dampened buyer demand and sales activity. Fresnillo and Glencore were the biggest laggards on the index, down 4% and 2%, respectively. Oil companies were also under pressure, with BP and Shell falling nearly 2%.

The Dow lost more than 200 points on Thursday, while the S&P 500 and Nasdaq 100 fell about 1% as investors fled stocks amid worries about a looming recession. The job market remained taut, with the number of Americans filing for unemployment benefits falling last week to a four-month low, throwing cold water on expectations that the Fed will back away from its hawkish stance. At the same time, recent data showed that retail sales, producer prices, and industrial production fell more than expected in December, exacerbating fears of a slowdown in the world's largest economy. Even after such disappointing data, the US central bank has kept its foot on the pedal, with Boston Fed Chair Susan Collins among the latest politicians to warn that rates must rise further to bring down inflation. 

The ruble-based MOEX Russia index fell more than 1% on Thursday, extending losses to a third session, dragged down mainly by losses in energy producers and banks. Russia has been selling its oil for around $50-$60 a barrel, well below global benchmark Brent, which fell 1.2% to $84 on Thursday. Moscow's energy sub-index is down more than 2% this year as Western sanctions have raised prices for ocean freight services and negatively impacted demand in top importers China and India. Falling oil revenues have already led the Kremlin to tap its $38 billion state welfare fund to fund its massive budget deficit on rainy days, an unprecedented move.

On Thursday, China Shanghai Composite rose 0.49% to close at 3,240 points. In comparison, the Shenzhen Composite rose 0.87% to close at 11,911 points, its highest level in four months. The outlook for China's economy improved after the index emerged from a dynamic clear zero policy. China's top economic official, Vice Premier Liu He, told the World Economic Forum in Davos that China's economy may rebound to pre-pandemic growth levels this year as coronavirus infections have passed their peak and consumption-related activities have slowed. Back to normal. Meanwhile, investors remained cautious ahead of the week-long Lunar New Year holiday as unexpected events could occur while markets are closed. Technology stocks and health care stocks led the gains, with East Money Information (3%), Shenzhen Infineon (4.9%), China Software (10%), Jiangsu Hengrui (5%), and Wuxi Apptec (2.9%) gaining strongly.
The Hongkong  Hang Seng Index fell 27.02 points, or 0.12%, to close at 21650.98 on Thursday, deviating from Wednesday's notable gains as disappointing U.S. retail sales and PPI data fueled concerns about growth prospects and corporate earnings, and Wall Street saw a pullback on Wednesday. Thanks to Country Garden Services (6.4%), Techtronic Industries (-5.4%), Xiaomi Corporation (-2.9%), Meituan (-2.5%), Fosun International (-1.5%), Li Auto (-0.9%) and Semiconductor Manufacturing international (-0.5%) losses, transport, retail trade, and transportation stocks mainly were down. Kuaishou Technology fell nearly 6%, its most significant drop in eight weeks after a major shareholder sold HK$3.78 billion shares.

The Nikkei 225 fell 1% to close at around 26,520, while overall, the Topix shed 0.9% to close at 1,918, snapping a two-day rally and gaining from Wall Street's negative lead. clues, as concerns about a global economic slowdown, outweighed optimism about a slowdown in the pace of central bank policy tightening. Investors also digested data showing Japan posted another trade deficit in December as imports rose more than exports. Japanese stocks rose sharply on Wednesday after the Bank of Japan kept interest rates ultra-low and kept yield controls on hold, defying expectations of another policy change. However, almost all sectors in Japan fell, with index heavyweights such as SoftBank Group (-2.8%), Toyota Motor (-2.1%), Tokyo Electron (-1.6%), Nintendo (-1.1%) and Mitsubishi Corporation (-1.2%) sharply fall.
The India BSE Sensex fell 190 points to close at 60,860 on Thursday, wiping out gains for the week and tracking losses on Wall Street overnight as investors digested a slew of U.S. economic data to hint at the Federal Reserve's guidance and growth for the world economy. prospect. Rate-sensitive automakers led losses in Mumbai, with Tata Motors down nearly 2 percent as Fed policymakers continued to back hawkish rhetoric. Meanwhile, Asian Paints fell more than 3% after missing its third-quarter profit target, mainly due to demand hits due to the monsoon. On the other hand, China's reopening continued to support base metals prices and lifted metallurgical stocks in India, with Tata Steel up nearly 1%.

On Thursday, the Australia S&P/ASX 200 rose 0.57% to 7,435, closing at its highest level in nearly nine months, as weaker-than-expected domestic employment data prompted traders to trim expectations for the pace of future rate hikes. Australia's employment rate unexpectedly fell in December, holding steady at 3.5% despite expectations for an increase to 3.4%. BHP Billiton Group (1.2%), Rio Tinto Group (3.3%), and Fortescue Metals (1.7%) led the gains. Financial firms also advanced, with the "big four" banks gaining between 0.1% and 1%. Elsewhere, technology, healthcare, gold, and lithium stocks also rose. In company news, Reuters reported that AGL Energy (-0.4%) named interim boss Damien Nicks as its permanent chief executive months after the generator's poor spin-off plans. They have forced its CEO and other top executives to resign.

New Zealand shares fell 37 points, or 0.31%, to close at 11,884 around midday on Thursday, reversing gains from the previous session, with the ANZ 50 hitting its highest level in more than nine months after weak economic data sparked a recession. Concerns followed Wall Street's negative lead on Wednesday. U.S. PPI and retail sales fell more than expected in December, while production of business equipment slumped, and a decline in factory output ended the weakest quarter for manufacturing since the outbreak. Meanwhile, hawkish comments from the Federal Reserve raised concerns about future U.S. rate hikes, even after further signs of economic weakness. Traders were also dismayed after new data showed New Zealand's annual food inflation rate hit its highest level in 32 years last month, with prices rising sharply across all categories. Electronic technology and energy mining led the gains, with leading gainers including Aofrio Ltd (2.5%), Ryman Healthcare (1.8%), Cannasouth Ltd (1.7%), Manawa energy (0.8%), and Mainforture Ltd (0.5%).

Brazil's Ibovespa stock index traded below the 112,000 level on Thursday, following two consecutive sessions of gains, drawing a negative mood in international markets amid renewed recession fears. Meanwhile, investors have been weighing Lula's comments on Brazil's central bank autonomy and fiscal stability. President Lula said in his first exclusive interview with GloboNews that the independence of the Central Bank of Brazil is "nonsense" and that the current inflation target, set by the National Monetary Council (CMN), hinders economic growth. On the domestic data front, Brazil's unemployment rate fell further to a 7.5-year low of 8.1% in the three months to November, in line with forecasts. On the corporate front, Brazil's Americans lost more than 27% after it said it was considering filing for bankruptcy after the retailer uncovered nearly $4 billion in accounting inconsistencies last week. Additionally, MRV and GOL posted steep losses, each down about 5%.

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most important data is:

- US: Preliminary estimates show that U.S. building permits fell 1.6% year-over-year to a seasonally adjusted annual rate of 1.11 million in December 2022, the lowest level since May 2020 and below the consensus estimate of 1.17 million. Licenses to act as future construction agents have declined as high inflation and rising mortgage rates hit demand for new housing. Single-family authorizations fell 6.5% to 730,000, the lowest level since April 2020, while volatile multi-sector authorizations rose 5.3% to 600,000. Permits declined in the South (-1.7% to 740,000), the Midwest (-15.6% to 1.68 million), and the Northeast (-2.5% to 115,000), but the West (9.3% to 3.07 million) rise.

- US: In the week ended January 14, the number of Americans applying for unemployment benefits fell by 15,000 from the previous week to 190,000, the lowest in four months and well below market expectations of 214,000. The result further cemented evidence of a tight labor market despite the Fed's aggressive tightening last year, challenging speculation that the central bank will stop tightening before reaching its final forecast rate of 5.25%. The 4-week moving average (which removes the week-to-week volatility) is down 6,500 to 206,000. On a non-seasonally adjusted basis, initial claims fell by 53,582 to 285,575, largely due to seasonal factors. Significant declines were seen in New York (-17.196), Michigan (-5540), and Georgia (-5072).

- US: In December 2022, U.S. housing starts fell 1.4% to a seasonally adjusted annualized rate of 1.182 million, the lowest level in five months but higher than the market forecast of 1.159 million. Starts for apartments with five or more units fell 18.9% to a rate of 463,000 units, while single-family apartment buildings rose 11.1% to 909,000 units. Starts were lower in the Midwest (-37.4%), West (-9.5%), and South (-4%) but were up 115.6% in the Northeast. Housing starts fell for the fourth straight month in December, pushing the decline to 3% in 2022, the first decline since 2009, as rising mortgage rates and inflation weigh on affordability.

- US: In December 2022, U.S. housing starts fell 1.4% to a seasonally adjusted annualized rate of 1.182 million, the lowest level in five months but higher than the market forecast of 1.159 million. Starts for apartments with five or more units fell 18.9% to a rate of 463,000 units, while single-family apartment buildings rose 11.1% to 909,000 units. Starts were lower in the Midwest (-37.4%), West (-9.5%), and South (-4%) but were up 115.6% in the Northeast. Housing starts fell for the fourth straight month in December, pushing the decline to 3% in 2022, the first decline since 2009, as rising mortgage rates and inflation weigh on affordability.

- CA: Canadian Wholesale Sales for November 2022 rose 0.5% month-over-month to $83.8 billion, revised from a preliminary estimate of a 1.9% increase, compared with a downwardly revised 1.9% gain in the previous month. Sales increased in the Motor Vehicles and Auto Parts & Accessories segment (10.1% to an all-time high of $11.8 billion) and the Machinery, Equipment & Supplies segment (2% to $17.9 million). Lower sales partially offset November's strong growth in the miscellaneous segment (-5.1% to C$12.2 billion). Four of the five industries posted sequential declines, but the fall was mainly in the agricultural supplies industry (-9.7% to $4.7 billion).

- EU: The accounts of the ECB's December policy meeting showed that some ECB policymakers had initially advocated a 75 basis point rate hike as inflation was expected to remain too high for too long, and the worsening outlook called for a larger walk than the market was pricing in. However, most members ultimately agreed to a small rate hike of 50 basis points on the condition that the central bank would commit to raising rates sharply and at a sustained pace to combat inflation amid uncertain economic conditions. Officials also noted that interest rates would be raised into restrictive territory if necessary and for longer than expected. The ECB has hiked interest rates by 250 basis points since the summer, and markets are already pricing at a peak rate of 3.2% by August 2023.

- IT: In November 2022, Italy's current account surplus was 446 million euros, a sharp decrease from 2.185 billion euros in the same period last year. Still, it was the second consecutive surplus after a series of unconventional current account deficits in 2022, as energy prices fell from annual peaks and limited the volume of commodity debits. As a result, the goods account surplus narrowed to 2.716 billion euros from 3.143 billion euros in the same period in 2021, while the services deficit widened to 2.08 billion euros from 1.703 billion euros, and the primary account surplus narrowed from 2.48 billion euros to 1.437 billion euros. On the other hand, the secondary account deficit fell from 1.734 billion euros to 1.627 billion euros.

- HK: Hong Kong's seasonally adjusted unemployment rate fell to 3.5% in the three months to December 2022 from 3.7% in September-November last year. It was the lowest unemployment rate in three months in January 2020, with the number of unemployed falling by 12,700 to 126,000, while the number of employed rose by 8,300 to 3,665,300. Unemployment fell in most sectors, notably consumption and tourism-related sectors; construction; transportation; and education. Looking ahead, the government noted that the labor market should continue to improve, supported by the lifting of most social distancing measures and the gradual resumption of normal travel in China. However, this may be partially offset by tightening financial conditions.

- CN: On Thursday, the People's Bank of China continued to inject liquidity into the financial system through open market operations. The People's Bank of China conducted a total of 532 billion yuan in reverse repos to the banking system, including 65 billion yuan for a 7-day term and 467 billion yuan for a 14-day term, with interest rates unchanged at 2% and 2.15%, respectively. The central bank said the move was aimed at keeping liquidity in the banking system reasonably significant, offsetting factors including government bond issuance payments and cash issuance ahead of the Lunar New Year, the central bank said, according to an online statement.

- AU: According to the Melbourne Institute, Australian consumer inflation expectations rose to 5.6% in January 2023 from 5.2% in December. However, a broad slowdown in expectations has been observed in recent months as consumers appear to be more comfortable with higher inflation. High-interest rates responded. Adjusted average inflation expectations have averaged 5.6% over the past three months, well below the June 2022 peak of 6.7%. Wage expectations also increased in January, with wage bills expected to rise 1.1% over the next 12 months, although confidence in future wage growth still showed no sign of a sustained rise.

- UK: 42% of respondents to the RICS UK Residential Market Survey in December 2022 reported rising house prices, the lowest level since October 2010, as higher borrowing costs and economic uncertainty dampened buyer demand and sales activity. The December data was also negative for the third consecutive month, with a net balance of -30%, which was lower than expected. Prices fell in all regions, with East Anglia and the South East seeing the most prominent net balances decline. Contracted sales also continued to weaken, with inquiries from new buyers falling slightly, and the number of homes for sale was the lowest since September 2021. RICS chief economist Simon Rubinsohn said the survey "highlights the challenges facing the housing market as new buyers grapple with more expensive financing conditions and an uncertain economic outlook."

- JP: Imports to Japan rose 20.6% year-on-year to 10,235.7 billion yen in December 2022, compared with market forecasts of 22.4% and a 30.3% rise in November. It was the 20th consecutive month of double-digit growth in inbound traffic and the slowest month since April 2021 due to sustained domestic demand, high commodity prices, and a generally weaker yen.

- JP: In December 2022, Japan's exports increased by 11.5% year-on-year to 8,787.3 billion yen. The market generally believed it was 10.1%, which increased by 20.0% in November. It was the 22nd straight month of growth in shipments. Still, the pace of growth was the slowest since January, with transportation equipment sales up 14.5%, led by motor vehicles (17.9%) and automobiles (18.1%), while machinery sales rose 11.2%, mainly from semiconductor machinery (9.2%). In addition, motor sales rose 6.1% due to semiconductors (0.4%); others (20.6%), led by scientific, optical instruments (0.6%); manufactured goods (8.3%), boosted by steel (3.7%); U.S. (16.9%), Taiwan (5.4%), South Korea (9.1%), Singapore (28.0%), Malaysia (8.6%), Indonesia (20.9%), Germany (4.9%), Australia (8.1%) and the European Union (27.0%) %); sales in China (-6.2%), Hong Kong (-0.7%) and Russia (-18.9%) declined. As a result, full-year shipment growth was 18.2%, down from 21.5% in 2021.

- SP: Spain's trade deficit fell to 3.31 billion euros in November 2022 from 4.21 billion euros in the same month last year. This was the smallest trade deficit since September 2021, as exports rose 23.3% from a year ago to an all-time high of €37.4 billion, supported by shipments of chemicals (67.5 %); capital goods (16.5%), food, beverages, and tobacco (7.9%); automotive products (32.1%) and energy products (33.3%). Among the main trading partners, overseas sales increased to the EU (32.4%) and the United States (25.3%) but decreased to China (-3.8%). Meanwhile, imports increased at a slower pace of 17.9% to 40.7 billion euros, reaching record highs in September, mainly thanks to the higher acquisitions of capital goods (20.3%); energy products (38.7%); chemicals (5.6%) and food, beverages and tobacco (26.2%). Among the top partners, imports from the EU increased (16.9%),

- SW: Swiss producer and import prices increased 3.2% year-over-year in December 2022, compared with a 3.8% increase in the previous month. It was the lowest producer and import price inflation since June 2021 due to the continued slowdown in import prices (4.4% versus 5.8%) and producer prices (2. 6% versus 2.8%). On a monthly basis, producer and import prices fell faster by 0.7% as pharmaceuticals became cheaper. Conversely, oil, natural gas, base metals, semi-finished metal products, chemicals, and metal products have become more expensive.

 

LOOKING AHEAD:

Today, investors should watch out for the following essential data:

- GBP: Retail Sales m/m.

- USD: FOMC Member Harker Speaks, Existing Home Sales, FOMC Member Waller Speaks, and FOMC Member Williams Speaks.

- CAD: Core Retail Sales m/m, and Retail Sales m/m.

- EUR: German PPI m/m, and ECB President Lagarde Speaks.

- CHF: SNB Chairman Jordan Speaks.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: Stock futures contracts tied to the three major indexes fell nearly 1% on Thursday, with Wall Street poised for sharp losses as investors fled stocks, fearing a looming recession. Data on Wednesday showed retail sales, producer prices, and industrial production fell more than expected in December, fueling fears of a slowdown in the world's largest economy. Meanwhile, the Fed shrugged off the dismal economic data, with St. Louis Fed President James Bullard and Cleveland Fed Presidents emphasizing the need to raise rates above 5% to bring inflation down to the 2% target. The focus now turns to the ongoing earnings season to get a sense of the health of corporate America. Netflix, Procter & Gamble, and Trust Financial were among the most notable names later in the day.

- FR: French 10-year bond yields hovered around 2.5%, remaining close to their lowest level since Dec. 14, as investors digested comments from the ECB's key policymaker on worries about a global economic slowdown and signs of easing inflationary pressures. ECB President Christine Lagarde warned that the central bank would keep raising interest rates until inflation reached its 2% target. However, markets may be underestimating the rate hikes planned by the European Central Bank, Knott said. Earlier this week, policy committee member Rehn said a sharp rate hike in the near term was justified to keep inflation expectations in check, while François Villeroy de Galhau said rates could peak in the summer. As a result, markets expect rates to peak at 3.2% by August 2023, down from a previous forecast of 3.5%. Elsewhere, weaker-than-expected U.S. economic data reinforced expectations that the Federal Reserve will continue to reduce the pace of tightening at its upcoming meeting.

- GE: Germany's 10-year bond yield hovered around 2%, near its lowest level since Dec. 14. Investors digested comments from major central bankers, while weaker-than-expected U.S. economic data reinforced expectations that the Federal Reserve will continue to reduce the pace of tightening at its upcoming meeting. In Europe, ECB President Christine Lagarde warned that the central bank would continue to raise interest rates and keep them within limits for as long as necessary to bring inflation down to its 2% target. A few hours earlier, Nott said that the market might be underestimating the eurozone central bank's plans to raise interest rates. Earlier this week, policy committee member Rehn said a sharp rate hike in the near term was justified to keep inflation expectations in check, while François Villeroy de Galhau said rates could peak in the summer. As a result, investors now expect the ECB's key interest rate to peak at 3.2% in August 2023, down from a previous forecast of 3.5%.

- US: U.S. 10-year Treasury yields, seen as a proxy for global borrowing costs, fell to around 3.3%, the lowest level since September 2022, amid fears of a sharp economic downturn and the U.S. Federal Reserve. The aggressive outlook then pushed up the appetite for government debt. Data on Wednesday showed Americans held back spending even as business investment fell, adding to concerns that the economy may be headed toward a recession. Meanwhile, producer prices have fallen by the most since the pandemic began, providing further evidence that inflation has peaked while giving the Fed room to ease monetary tightening. Money markets are now pricing in a near 95% chance that the U.S. central bank will raise rates by 25 basis points in February. Still, hawkish comments from several Fed policymakers underscored that the fight against inflation is far from over.

 

LEADING MARKET SECTORS:

Strong sectors: Communication Services, Health Care.

Weak sectors: Financials, Consumer Discretionary, Information Technology, Industrials, Materials.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- JPY: The yen rose to around 128 yen per dollar, back to its highest level in nearly eight months, as speculators doubled down on bets that the Bank of Japan will need to change policy soon. Markets are focusing on the possibility of action at the central bank's March policy meeting and April's policy meeting when the Bank of Japan's new governor takes office. The yen came under intense selling pressure earlier this week after the Bank of Japan kept interest rates ultra-low and its yield control policy on hold, defying expectations of another policy adjustment. The central bank kept its yield curve control target for short-term rates at -0.1% and the 10-year yield around 0%, as well as a 0.5% cap, as policymakers said they would not seek to Get out of massive stimulus now.

- USD: The dollar index steadied above 102 on Thursday after briefly falling to a seven-month low of 101.53 in the previous session, as investors digested weak U.S. data and hawkish comments from Federal Reserve officials. Fresh data showed U.S. retail sales fell more than expected in December, while U.S. producer prices fell by the most since April 2020, raising concerns about a potential slowdown. Meanwhile, Fed Chair James Bullard said interest rates were not yet capped and could rise to 5.5% by the end of the year, while Fed Chairs Loretta Mester and Patrick Harker also supported further hikes. The dollar came under pressure again this year as annual U.S. inflation slowed to 6.5% in December for the sixth straight month, the lowest level since October 2021, raising hopes that inflation peaked at 9.1% in June. The data bolstered expectations that the Fed would ease back to a modest hike of 25 basis points in February after raising rates by half a percentage point in December.

- NZD: New Zealand shares fell 34.77 points, or 0.3%, to 11,885.64 on Thursday, retreating from a more than nine-month high hit in the previous session after Prime Minister Jacinda Ardern announced she would resign ahead of a general election later this year. The leader mentioned that she has no energy or inspiration to seek re-election and will leave office by early February. Ardern has set the election date for October 14. U.S. stocks fell sharply on Wednesday after weak retail sales and producer prices, with traders also reluctant to enter new positions. According to local data, New Zealand's annual food inflation rate hit a 32-year high in December, driven by a surge in all types of food. Communications, consumer, and health tech stocks all ended in the red, with the worst performers including A2 Milk Co (-2%), Spark New Zealand (-1.2%), Fisher & Paykel (-1%), Mercury NZ Ltd. (- 0.8%) and Contact Energy (-0.6%).

- GAS: Gasoline futures continued their upward trend to $2.6 a gallon, their highest level in two months, following gains in other energy-related commodities on optimism about future fuel demand. On the supply side, OPEC and its allies agreed in December to maintain their policy of cutting oil production, capping global supplies by 2 million barrels a day through the end of 2023. Meanwhile, The latest EIA report showed that US gasoline inventories rose by 3.483 million barrels in the week ending January 13, compared with analysts' expectations of a build of 2.529 million.

- WET: Chicago wheat futures fell to $7.4 a bushel, approaching a 15-month low of $7.3 hit on Jan. 10 and following declines in other grains as rains at Argentina's top producer eased fears of drought and added to strong supply expectations from other producers. In Russia, industry research leader Sovecon has revised its shipment projections for the world's leading 200,000-ton exporter to 44.1 million for the current marketing year due to a record harvest and record inventories. Another major exporter, Australia, has also forecast its harvest to reach a historic 42 million tons over the same period. Finally, the expansion of farmland in India has raised expectations that the current harvest would set a record and lead to the lifting of the ban on wheat exports from New Delhi.

- WTI: WTI crude futures stabilized around $80 a barrel on Thursday, near levels not seen since early December, as investors became optimistic about a recovery in global demand. The International Energy Agency said with China moving away from its tough COVID-19 limits, demand for crude oil is likely to hit a new record this year. At the same time, cap price sanctions on Russia could affect the offer.OPEC echoed a similar view in its monthly report released earlier this week, saying demand for crude oil will rise by 2.22 million barrels per day (BPD), or 2.2%, in 2023. However, dismal US economic data, including the steepest declines in manufacturing output in nearly two years, stoked worries about a recession, dimming the prospects for such a rebound in demand.

- IRN: Prices for cargoes of iron ore with an iron ore content of 63.5% for delivery to Tianjin were $123 per ton, hovering relatively close to a seven-month high of $127 amid signs of tight supply and robust demand, as investors shrugged off further warnings that China's government would crack down on speculative pricing. According to the latest data, China's GDP and industrial production grew more than expected, signaling resilience to the country's strict lockdowns during the fourth quarter. Meanwhile, the boost to the economy caused by the increase in the zero Covid policy is expected to bolster credit health and stimulate demand for housing as commercial banks have opened new credit lines for developers. However, on the supply side, Q1 cyclones and mine maintenance programs threatened firm exports from Australia's top producer.

- TRY: The Turkish lira held a record low of 18.8 per USD in January after the TCMB kept its interest rate at 9% at its last meeting, it was previously reported. The decision marked the end of the central bank's easing cycle, which began after President Tayyip Erdogan lobbied the Monetary Policy Committee to cut unorthodox interest rates by ten percentage points starting in September 2021 to stimulate growth. and exports of the economy. The move caused the lira to slip 29% in 2022 and trade 55% below its pre-rate cut path levels, causing more expensive energy imports to lift the inflation to 86% in October. Moreover, the latest current account and trade-in goods deficits have widened significantly, contradicting Erdogan's pledge that Turkey would consolidate a strong surplus position.

 

CHART OF THE DAY:

Brent crude futures stabilized around $86 a barrel on Thursday, near levels not seen since early December, as investors became optimistic about a recovery in global demand. The International Energy Agency said with China moving away from its tough COVID-19 limits, demand for crude oil is likely to hit a new record this year. At the same time, cap price sanctions on Russia could affect the offer.OPEC echoed a similar view in its monthly report released earlier this week, saying demand for crude oil will rise by 2.22 million barrels per day (BPD), or 2.2%, in 2023. However, dismal US economic data, including the steepest declines in manufacturing output in nearly two years, stoked worries about a recession, dimming the prospects for such a rebound in demand.

 

 

- Brent crude oil - chart (D1), downtrend, Resistance (target zone) around ~ 89.733, Support (consolidation) around  ~ 79.309.

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Risk Warning; CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58.58% 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.
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