GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

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

The Dow rose more than 100 points on Tuesday, while the S&P 500 and Nasdaq 100 fell 0.1% and 0.3%, respectively, as investors digested a batch of economic data and earnings while recession fears remained. The latest flash U.S. PMI data showed business activity in both manufacturing and services remained below double digits, amplifying the impact of tighter financial conditions on growth and reinforcing bets the Fed will ease the pace of tightening. On the corporate front, industrial giant 3M tumbled more than 6.2 percent after reporting a drop in profit, while General Electric rose 1.1 percent after reporting quarterly results that beat expectations. Meanwhile, Johnson & Johnson reported a 25% drop in fourth-quarter revenue and lower sales as it posted a slight loss due to lower demand for a Covid-19 vaccine. After the bell rang, all eyes turned to Microsoft's report.

The Canada S&P/TSX Composite closed at 20,629 on Tuesday, almost unchanged from the previous session. A slew of U.S. corporate earnings misses underscored concerns that high-interest rates hamper corporate performance. Still, U.S. PMI data showed a slower-than-expected contraction, alleviating concerns about tightening policy. Consumer discretionary fell 0.7 percent, while energy and technology.SPLRCT fell 1 percent each. On the other hand, base metals and health care rose 0.4 percent and 0.2 percent, respectively, while financials rose 0.1 percent. Investors await the Bank of Canada's policy decision tomorrow, with money markets pricing in a quarter-point hike in interest rates, hoping the bank's tightening cycle is over.

 The Baltic Exchange's dry bulk shipping index, which measures the cost of shipping goods around the world, fell for the sixth consecutive session on Tuesday, falling about 2.6% to a more than 2-year low and a half of 721 points due to normal seasonality combined with an earlier than usual Lunar New Year holiday. The Capesize index, which tracks iron ore and coal cargoes of 150,000 tons, slipped about 6.8% to a new four-month low of 685 points; and the Panamax index, which tracks about 60,000-70,000 tons of coal and grain cargoes, fell about 1.2% to a more than two-year low of 1,035 points. Among the smaller ships, the supramax index snapped its more than a-month-long losing streak, gaining four points to 649 points.

European shares edged lower on Tuesday, with the pan-European STOXX 600 down 0.2%, led by losses in healthcare and oil and gas stocks. Meanwhile, Germany's DAX closed little changed at 15,100. The stronger-than-expected PMI data bolstered expectations that the European Central Bank will maintain its positive stance on inflation. The latest survey showed that business activity in the eurozone returned to growth after six straight months of decline, with business confidence posting its biggest gain since the coronavirus outbreak despite high inflation and rising borrowing costs. Also, German consumer sentiment improved for the fourth straight month going into February as energy prices fell. On the corporate front, peripheral computer maker Logitech International said sales fell 22% in the third quarter, confirming preliminary results. Swiss watchmaker Swatch Group reported sales growth in 2022 of 2.5% and expressed a positive attitude towards the recovery of the Chinese market. On Tuesday, the FTSE MIB index rebounded in late trading to close at 25,885 points, up 0.2%, close to the 11-month high hit last week, as investors digested a batch of economic data and continued to assess the European Central Bank's monetary policy outlook, the bank said. and utility support. Despite concerns about persistently high inflation, the latest data from euro zone PMIs supported the idea of a milder recession than previously feared. Meanwhile, Panetta, governor of the Bank of Italy and member of the ECB's executive board, said it was too early to judge the size of the central bank's decision in March, despite recent signs of a 50-basis-point hike starting next week. Banks benefited from higher BTP prices, with Intesa Sanpaolo up 2 percent, UniCredit, and BPER Banca up 1.5 percent each. Meanwhile, utility providers recorded gains on lower TTF contract prices. The CAC 40 index reversed course and closed at a one-week high of 7,051, up about 0.3%, as investors welcomed upbeat economic data from the eurozone while weighing future moves by the European Central Bank. Preliminary Eurozone PMI beat forecasts and pointed to a return to growth in private sector activity. In France, manufacturing also returned to growth, while services continued to decline. Among the top gainers, ad agency network Publicis Groupe jumped nearly 3 percent after it announced the appointment of Demet Ikier as its EMEA chief operating officer (COO). In addition, utilities grew steadily, with Engie and Veolia Environnement up 2.8% and 1.6%, respectively. In contrast, Essilorluxottica underperformed (-1.8%). The Ibex 35 rose 0.2% to 8,968 on Tuesday, hitting its highest closing level since November 2021 and extending a 0.3% gain from the previous session as investors digested a batch of new PMI data from major European economies and assessed the outlook for the global market growth and monetary policy. The latest PMI survey showed that economic activity in the Eurozone is picking up again after six months of decline. While, German consumer morale also improved, rising for a fourth month in February mainly due to lower energy prices. On a global scale, traders weighed expectations of slower rate hikes from the US Federal Reserve against the prospects of an aggressive stance from the European Central Bank. Domestically, most stocks closed in profit, led by Logista (3.19%) and Indra Sistemas (1.90%). Repsol was the laggard, down 1.45%.

London stocks rose for a second day on Tuesday, dragged down by the healthcare and energy sectors, with the blue-chip FTSE 100 closing around 7,760. The flash PMI survey showed the biggest drop in business activity in two years, mostly reflecting weaker service sector performance. The British government posted a record deficit in December as debt payments, and spending on energy support programs rose. AstraZeneca fell more than 2%, making it one of the biggest losers.

On Tuesday, the Nikkei 225 gained 1.46% to close at 27,299, while the broader Topix added 1.42% to 1,973, its third straight gain and tracking another gain on Wall Street amid concerns over the pace of Fed rate hikes. Smaller expectations boosted technology and other growth stocks. Japanese stocks also built on last week's gains as the Bank of Japan stuck to its ultra-low interest rate policy despite rising inflation and mounting pressure for further policy adjustments. Again, technology stocks led the gains, with Tokyo Electron (2%), SoftBank Group (3.4%), Keyence (1%), Advantest (3.1%), and Mercari (1.9%) posting strong gains. Almost all other sectors were up, with index heavyweights such as Mitsubishi UFJ (2.5%), Sumitomo Mitsui (2.4%), Sony Group (1.9%), Oriental Land (2.8%), and Toyota Motor (1.2%) notable gains.

The New Zealand ANZ 50 index fell 15.80 points, or 0.11%, to end at 11,932.92 on Tuesday, giving up gains made in early trade to end lower for a second day in a row as traders scrambled after the index hit a nine-month high recently. Attempt to record profits. Investor caution grew as New Zealand's services sector activity rose the least since April-December amid a drop in employment. Meanwhile, U.S. stock futures edged lower on Monday after a sustained rally on Wall Street, with traders anticipating a slew of economic data this week, including U.S. fourth-quarter GDP growth, new home sales, and the PCI price index. Tech, consumer durables, and financials fell, with Cannasouth Limited (-4.8%), MHM Automation (-4.6%), Briscoe Group (-1.7%), A2 Milk Co (-1.1%) and KMD Brands Ltd (- 0.9%) fell. On Wednesday, local media said just six days after Jacinda Ardern's abrupt resignation, Chris Hipkins would be officially sworn in as New Zealand's prime minister.

The Australia S&P/ASX 200 rose 0.2% to around 7470 on Tuesday, its highest level in nine months, with technology and mining stocks leading the market. Australian shares also tracked Wall Street's overnight gains, as expectations of less aggressive Fed rate hikes boosted technology and other growth stocks. Stocks leading gains in the technology sector included Xero (2.5%), Block Inc (7%), Wisetech Global (1.6%), Brainchip Holdings (3.7%), and Sezzle Inc (7.3%). Zip Co also rose 8 percent after its revenue rose 12 percent to A$188 million in the December quarter. Heavyweight iron ore miners and clean energy-related companies also made gains, including BHP Billiton Group (0.9%), Rio Tinto Group (0.3%), Fortescue Metals (0.6%), Pilbara Mining Company (2.1%), and mineral resource companies (3.6%).

The India BSE Sensex fell earlier on Tuesday to close above the 60,980 level, enough to extend the previous session's sharp rally, as investors digested a batch of corporate earnings and assessed expectations for next week's EU budget. Heavyweight automakers led gains, supported by a 3.2 percent rise in shares of the country's top automaker Maruti Suzuki, which beat profit estimates and improved margins in the December quarter. The technology sector also posted gains, tracking the U.S. Nasdaq's steady year-to-date gains as investors expect the Federal Reserve to slow down its pace of rate hikes. Meanwhile, banks ended mixed even as corporate results confirmed expectations for strong earnings in the sector. Axis Bank fell 2.4 percent despite third-quarter profit beating expectations, while HDFC Bank extended its choppy momentum to a 1 percent gain.

 

REVIEWING THE LAST ECONOMIC DATA:

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

- NZ: In the fourth quarter of 2022, New Zealand's inflation rate increased by 7.20% year-on-year, unchanged from 7.20% in the third quarter of 2022. Food (10.7% vs. 8% in the third quarter), alcoholic beverages and tobacco (5.9% vs. 4.7%), household goods (8.2% vs. 7.1%), and health (8.2% vs. 7.1%) saw faster price increases. In contrast, inflation eased in housing and household utilities (8 percent to 8.7 percent) and transportation (8.2 percent to 7.1 percent). Meanwhile, communication costs fell (-0.3% vs. +3.1%), and the December quarter consumer price index rose 1.4%.

- IT: Italian electricity prices rose above 200 euros per megawatt-hour, rebounding from an 11-week low of 150 euros hit on Jan. 18, as a brief cold front in the country boosted demand for natural gas, Italy's main power feedstock. Still, the cost remains well below the record high of 655 euros hit in early September, as a mild winter in Europe improved LNG supplies, and the win of long-term contracts from alternative sources spared Europe's dire situation from a supply shock from Russia. Moreover, after Moscow stopped gas supplies, the Italian government and energy giant Eni jointly pledged to increase energy investment in Algeria, aiming to expand the current TransMed pipeline and become Europe's energy import hub. Meanwhile, Italy's new government is raising its budget deficit to 4.5 percent of GDP next year to provide businesses and households with more than 21 billion euros in tax breaks and bonuses amid the energy crisis.

- US: In January 2023, the Fifth District Services Activity Income Index increased to -6 from -12 in December. Also, the demand index rose to -6 from -12, and business expectations for income and demand over the next six months also improved. Firms' assessments of current and expected local business conditions improved slightly but remained low. The employment index rose (9 to -2), but firms' ability to find workers with the necessary skills showed slight improvement. Companies continue to raise wages and expect further increases in the near term. The average increase in prices paid increased slightly, while the rise in prices received decreased somewhat. The company expects both conditions to ease over the coming year.

- US: An index of manufacturing activity in the Richmond area fell to -11 in January 2023 from 1 in December, the lowest reading since May 2020 and below market expectations of -5. Each of its three component indexes: shipments (-3 to 5 in December), new orders (-24 to -4), and employment (-3 to 3) all declined. The order backlog index fell further to negative, indicating that the backlog of companies continued to decline. At the same time, the supplier delivery time index is also well below 0, indicating that the delivery time continues to decline. The average growth rate of both prices paid and received declined in January. Expectations for two measures of price growth over the next 12 months also fell well below last year's levels. Companies were generally pessimistic about conditions in the next six months, although the local business conditions expectations index rose from December.

- US: Preliminary estimates show that the S&P Global U.S. Services PMI rose to 46.6 in January 2023 from 44.7 at the end of 2022, above market expectations of 45.0. The latest data showed a steady decline in services sector output, but it was the weakest since October due to customer indecision and high inflation. Overall, the decline in new business was negligible, while employment rose only slightly, and the backlog of work shrunk further. On the price front, input cost inflation accelerated, and output price inflation was unchanged from December. Finally, business confidence hit a four-month high, hoping to improve demand conditions at home and abroad.

- US: Preliminary estimates showed the S&P Global U.S. Composite PMI rose to 46.6 in January 2023 from 45.0 the previous month, suggesting the country's private sector contracted for the seventh straight month, but at the slowest pace since last October. Activity in services and manufacturing fell slower, although companies continued to highlight the impact of weak client demand and high inflation on client spending. Amid high inflation, rising interest rates, and customer hesitation, new orders fell for the smallest amount in three months, while employment rose slightly and a backlog of work steadily declined. On the price front, input cost inflation accelerated from December, snapping a seven-month streak of modest increases, while output cost inflation remained unchanged. Finally, as 2023 progresses, customer demand is expected to recover, and business confidence strengthens to its highest level in four months.

- US: Preliminary estimates showed the S&P Global U.S. manufacturing PMI rising to 46.8 in January 2023 from 46.2 in December, beating market forecasts of 46. Still, the reading continued to point to a contraction in factory activity, the second fastest since May 2020, as manufacturing demand conditions remained subdued. Output shrank after new order inflows fell again sharply, with companies highlighting the impact of higher costs on customer demand. The decline in new business was the second fastest in two-and-a-half years, with companies cutting headcount for the first time since July 2020. On the price front, input costs rose quicker, ending a series of moderating cost inflation from mid-2022, while output prices also rose. Supplier performance deteriorated only slightly. However, commodity producers were more optimistic about the outlook as companies tried to acquire new customers through marketing and product launches.

- UK: According to the latest Industrial Trends Survey from the Confederation of British Industry (CBI), the order balance at the Confederation of British Industry fell by 11 percentage points from the previous month to -17 in January 2023, at The lowest level since February 2021, also below market expectations of -8. The latest data also showed that order totals were below average for the sixth month, with companies reporting that orders or sales would limit output, the highest level since April 2021. In addition, the sub-index for export orders fell another three percentage points to -22, the lowest level since February 2021, while a measure of manufacturing output was little changed in the three months through January. On the price front, manufacturers' expectations for the next three months fell to their lowest level since September 2021 (+41 vs. +52 in December) as global supply chain pressures, labor shortages, and energy costs eased.

- UK: The Confederation of British Industry's (CBI) quarterly optimism index in UK manufacturing improved to -5 in the first quarter of 2023 from -48 in the previous quarter, but still noted that most respondents felt much less confident about the prospects. Business and export optimism fell for the fifth quarter, but at a much slower pace than in the previous three months.

- RU: In late January, as the Bank of Russia resumed its intervention in currency markets, the Russian ruble stabilized around 69 per dollar, holding above an eight-month low of 72.5 touched in the first week of January. The central bank sold $47 million worth of yuan to buy rubles after falling revenues from oil sales dampened capital inflows. Revenues from oil sales have fallen in the past few months after Western sanctions dampened demand in Europe and forced Russian producers to offer steep discounts to remaining Asian buyers.

- EU: Preliminary estimates show that in January 2023, the S&P global euro zone services PMI rose to 50.7 from 49.8 in the previous month, higher than market expectations of 50.2. The latest data showed activity in the services sector expanded for the first month since July, driven by the technology, health care, and pharmaceutical sectors. However, industrial services also rebounded into growth territory. Meanwhile, recessions in financial services (genuine estate) and basic resources have eased. In contrast, consumer-facing sectors such as travel, entertainment, and home goods have stabilized after months of declines. New business to service providers fell only slightly, and job growth accelerated. On the price front, input cost inflation fell to an 11-month low while average selling price inflation rose.

- EU: Preliminary estimates show that the S&P Global Eurozone Composite PMI rose to 50.2 in January 2023 from 49.3 in the previous month, above the market consensus of 49.8. The latest data showed business activity expanded for the first time since last June as activity in the services sector rebounded, driven by the technology, health care, and pharmaceuticals sectors, and a weak contraction in manufacturing activity. Overall, the decline in new orders and backlogs was the smallest in seven months, while employment rose faster in three months. On the price front, input costs rose at the slowest pace since April 2021, while prices rose quicker amid efforts to rebuild margins. Finally, business confidence registered its most significant monthly increase since June 2020 and the highest since last May.

- EU: Preliminary estimates show that in January 2023, the S&P Global Eurozone Manufacturing PMI rose to 48.8 from 47.8 in the previous month, higher than market expectations of 48.5. The latest data showed factory activity contracting at its mildest pace since August 2022. New orders fall at the slowest pace since last May, though still a sharp drop; employment accelerates. Meanwhile, factories reported unchanged supplier lead times for the second straight month, in contrast to worsening supply conditions in the previous three years. On the price front, input cost inflation fell below its pre-pandemic average to the lowest level since October 2020, while average prices rose slightly. Finally, there was an improvement in optimism about the year ahead.

- FR: A quick estimate puts the S&P Global France Composite PMI at 49 for January 2023, little changed from 49.1 in December and below market expectations of 49.5. The latest data showed that business activity in the French private sector economy fell for the third consecutive month, with continued weakness in the services sector (December PMI 49.2 to 49.5). On the other hand, manufacturing activity returned to growth after contracting for five straight months (PMI 50.8 vs. 49.2). Total new orders fell for the sixth consecutive month in January amid rising interest rates and a high-inflation environment. At the same time, employment rose for the fifth straight month, and job creation was picking up. On the price front, input cost inflation has slowly increased since February 2022. However, sales price inflation rose to a three-month high in January. Finally, business confidence rose to a six-month high.

- DE: In January 2023, the S&P German global manufacturing PMI unexpectedly fell to 47 from 47.1 in December, compared with the consensus forecast of 47.9. According to preliminary estimates, the data showed factory activity contracting for the seventh straight month. Procurement activity by commodity producers continued to decline sharply, reflecting lower production requirements and the depletion of safety stocks as material supplies improved further. As a result, the average lead time for inputs decreased significantly, shrinking for the third consecutive month. In addition, manufacturing production extended losses, and employment growth weakened. On the other hand, as the supply chain pressure eased, the cost pressure slowed down.

- DE: Preliminary estimates show that Germany's S&P Global Composite PMI rose to 49.7 in January 2023 from 49.0 the previous month, broadly in line with market expectations of 49.6. The latest data showed activity in the services sector rose for the first time since last June, contracting for the seventh straight month, although it was the mildest. Meanwhile, manufacturing production continued to decline. Overall inflows of new jobs fell at a more moderate pace, while the rate of job creation picked up slightly to a six-month high. Manufacturers' pre-production and post-production inventories fell for the first time in 16 and nine months, respectively. On the price side, both input and output costs have grown at a lower rate. Finally, business sentiment turned positive for the first time since last August, reaching its highest level since Russia invaded Ukraine last February.

- DE: Germany's GfK consumer climate indicator rose to -33.9 in February 2023 from a slightly revised -37.6 in January, compared to -33.0 expected by the market. The latest reading, the highest since August 2022, points to an improvement in sentiment for the fourth straight month amid lower energy prices, with revenue expectations (-32.2 versus -43.4) and economic conditions (-0.6 versus -10.3) both improving. recovered. Meanwhile, willingness to buy fell slightly (-18.7 versus -16.3) as consumers anticipated higher heating bills in the coming months. The index hit an all-time low of -42.8 in October 2022. GfK consumer expert Rolf Bürkl said: "Falling energy prices have ensured consumer sentiment is less pessimistic. Nevertheless, 2023 will remain difficult for the domestic economy. Private consumption will not be able to contribute significantly to this year. contribute positively to the overall economic development of the country. This is also indicated by the fact that the level of this indicator remains low."

- JP: The au Jibun Bank Japan Services PMI rose to 52.4 in January 2023 from the final reading of 51.1 in December, remaining expansionary for the fifth month in a row, pointing to a modest rise in services sector activity. The report pointed to the National Travel Discount Scheme and the recent easing of COVID-19 restrictions as major factors encouraging expansion in the services sector. However, employment levels fell for the first time in a year and reached the most significant level since May 2020. On prices, input cost inflation rose further in January, but companies raised selling prices at the most modest pace in five months. As a result, firms were reportedly concerned about pricing pressure and recorded the lowest level of business confidence in two years.

- AU: The NAB Business Confidence Index in Australia rose 3 points to -1 in December 2022, remaining in negative territory for the second consecutive month and below the long-term average. Sentiment strengthened across most sectors except transportation and utilities. Meanwhile, business conditions fell in the third month (12 to 20 in November) as sales (18 to 27), profitability (12 to 19), and employment (8 to 11) fell. Conditions declined broadly, with moderation across all sectors. Leading indicators suggest that conditions may ease further, with forward orders gradually falling (3 to 5) and capacity utilization easing, although remaining above the 83.7% average. Price and cost growth has slowed but are still rising. NAB Chief Economist Alan Oster said: "While economic activity remains steady, there is a marked slowdown in momentum. We know the full impact of interest rates has yet to be felt, so the survey should show signs of growth in the coming months. The accelerating impact of interest rates.”

- AR: Argentina's economic activity estimator rose 2.6% year-on-year in November 2022, slowing from a 4.5% increase the previous month. It was the slowest annual growth since February 2021, led by weaker performance across most sectors. The slowdown in economic activity was recorded in the mining and quarrying sectors (+9.5% vs +12.8% in October), hotels and restaurants (+22.1% vs +27.8%), wholesale, retail trade and repairs (+3.5% vs 5.5%), and transport (+2.6% vs. 6%), real estate, trade and leasing (+3.6 vs. 3.8%) and manufacturing industry (+2.0% vs. +3.9%).On the other hand, agriculture (-6.3% vs. -0.2%), financial intermediation (-3.3% vs. -1.8%), and fishing (-16.8% vs. - 29.6%). On a seasonally adjusted monthly basis, Argentina's economy contracted by 0.7% in November.

- HU: The National Bank of Hungary kept its base rate unchanged at 11% for the fourth consecutive decision at its January 2023 meeting, in line with market expectations and previous signals. Currently, the instrument to counter the rise in inflation and the weak guilder is the one-day deposit at a rate of 18%, which was extraordinarily created in October, also unchanged at the shareholders' meeting, effectively replacing the base rate. The facility was created when a weakening local currency and high energy prices prompted Hungarian Prime Minister Viktor Orban to pressure the central bank into taking emergency measures. As a result, Hungary's annual inflation rate rose to 24.5% in December 2022, the highest over 26 years.

 

LOOKING AHEAD:

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

- CAD: BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, and BOC Press Conference.

- CNY: Bank Holiday.

- CHF: Credit Suisse Economic Expectations.

- AUD: MI Leading Index m/m, CPI q/q, CPI y/y, and Trimmed Mean CPI q/q.

- GBP: PPI Input m/m, and PPI Output m/m.

- EUR: German IFO Business Climate, and Belgian NBB Business Climate.

- USD: Crude Oil Inventories

 - AUD: Bank Holiday.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: Stock futures contracts linked to the three major indexes fell about 0.5% on Tuesday as investors digested a string of earnings results while awaiting the release of critical economic data. Industrial conglomerate 3M tumbled nearly 5% in pre-market trading after reporting a drop in profit. Johnson & Johnson fell almost 1% even as the pharmaceutical giant reported better-than-expected quarterly results and guidance. Meanwhile, General Electric shares rose 2% after reporting results that surprised investors. Now, all eyes are on Microsoft, which will report earnings after the close. Beyond that, the S&P Global PMI later today will spark the debate over whether the world's largest economy is headed toward recession or already in it. In regular trading on Monday, the Nasdaq Composite rose 2.01%, the S&P 500 rose 1.19%, and the Dow rose 0.76%, with all three benchmarks turning positive again this year.

- RU: Yields on Russia's 10-year OFZ bonds rose more than 10.5% in late January, the highest level since a brief peak of 11% in late September caused by Russia's military mobilization, as concerns over the Kremlin's fiscal sustainability mounted. The steep discounts on Urals oil continue to jeopardize the budget law passed by President Putin, which aims to generate an additional 8 trillion rubles in revenue from energy by 2025. The document assumes oil will sell for $70 a barrel rather than the recent sub-$40 price. The law also allocated 2.9 trillion rubles to Russia's Rainy Day State Welfare Fund, an unprecedented move that underscores the unsustainability of rising debt. Meanwhile, the federal government posted a record 3.9 trillion ruble budget deficit in December, wiping out a surplus for the first 11 months of 2022, as public revenues dwindle and spending increases for Russia's invasion of Ukraine.

- UK: U.K. 10-year government bond yields fell back to 3.3%, hovering near their lowest level since Dec. 14, as weaker-than-expected PMI data highlighted the risk of a U.K. recession and cast doubt on the Bank of England's policy path. British business economic activity fell at the fastest pace in two years in January, the latest survey showed, citing weaker consumer demand amid rising interest rates, strikes, and rising living costs. Investors are confident the Bank of England will raise interest rates again to 4% at its next meeting but are divided on how much further borrowing costs will rise beyond that level. Meanwhile, UK consumer price inflation fell to 10.5% in December as expected but remained well above the Bank of England's 2% target, while core interest rates were near October's record high; while the latest employment report showed that Wages in the UK are growing at the fastest pace on record, excluding growth during the COVID-19 pandemic.

 

LEADING MARKET SECTORS:

- Strong sectors: Industrials, Utilities, Real Estate, Consumer Staples, Financials.

- Weak sectors: Communication Services, Health Care, Energy, Consumer Discretionary.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- OIL: U.S. crude inventories rose by 3.378 million barrels for the week ending January 20, 2023, after rising by 7.615 million barrels in the previous week, according to the American Petroleum Institute. That exceeded analysts' expectations for an increase of 1.6 million barrels. Brent crude futures fell more than 1% to below $87 a barrel on Tuesday, retreating from a more than one-month high of $89.1 hit in the previous session as fears of a global recession weakening demand continued to loom over the market. However, the reopening of the Chinese economy has given markets reasons to be optimistic about a rebound in demand this year. Weakening US economic data has also bolstered bets for a slower pace of Federal Reserve rate hikes, with Fed officials advocating for a 25 basis point hike next week. On the supply side, the EU and G7 nations will cap the prices of refined Russian products starting in February, on top of the price cap on Russian crude that has been in effect since December and the EU embargo on imports of Russian oil by sea.

- GBP: Sterling fell to $1.23 from a near six-week high of $1.245 hit on Jan. 23 after weaker-than-expected data highlighted the risk of Britain slipping into recession. The latest PMI survey showed that British business economic activity fell at the fastest rate in two years in January, with rising interest rates, strikes, and weak consumer demand due to rising living costs. On the policy front, the Bank of England will raise interest rates by half a percentage point to 4.0% at its February policy meeting in response to double-digit inflation. However, markets are divided on how much further to rise in rates, while they expect bank rates to peak at around 4.5% by the middle of the year. Data last week showed UK inflation moved further away from October's 41-year high but remained well above the central bank's 2 percent target. Elsewhere, investors saw the Federal Reserve less aggressive following the release of dismal U.S. economic data.

- USD: The U.S. dollar index held below 102 on Tuesday, hovering near its lowest level in nearly eight months, as rising risks of a U.S. recession and expectations of less policy tightening by the Federal Reserve weighed on the greenback. Recent U.S. economic data suggests that the overall economy is facing rising headwinds. Meanwhile, moderation in U.S. inflation has fueled speculation that the Fed will further slow the rate hikes, with money markets now pricing in more than a 95% chance the central bank will raise the Fed funds rate by a quarter point at its next meeting. Federal Reserve President Christopher Waller also said that the upcoming rate change and the expected continued decline in inflation brought policy close to "adequate restraint." Investors are now looking ahead to a slew of U.S. data that may offer clues to the path of interest rates, including fourth-quarter GDP growth, durable goods orders, the PCE price index, and personal income and spending data.

- GAS: US natural gas futures fell below the $3.3/MMBtu threshold, hovering near levels not seen since June 2021, on expectations of lower demand after forecasts pointed to warmer weather in the next two weeks. Meanwhile, Freeport LNG, the US's second-largest LNG exporter, said earlier this week that it had finished repairs to its plant and asked US regulators for permission to take initial steps to restart the inactive plant.US natural gas prices have fallen more than 30% since the start of 2023 and are now nearly 70% below their August peak of $10 as warmer weather delayed the winter heating season.

- CRN: Chicago corn futures held above $6.7 a bushel, not far from a more than two-month high of $6.8 hit on Jan. 17 amid supply chain disruptions, rising input costs, and increasing global demand. The ongoing war in Ukraine, which accounts for 15% of global corn exports, with late planting in the United States and dry weather in South American countries, continued to weigh on production. As a result, the U.S. Department of Agriculture estimated total corn production in 2022 at 11.730 billion bushels, down 1.4% from last November's estimate and 9% from the 2021 estimate of 15.074 billion bushels. Meanwhile, demand from major consumers in the US and China, particularly in sectors such as animal feed, has seen further recovery. In addition, China is set to ramp up corn purchases after it reopens its economy following prolonged COVID-19 lockdowns.

 

CHART OF THE DAY:

WTI crude oil futures fell more than 1% to below $81 a barrel on Tuesday, down from a more than one-month high of $82.7 hit in the previous session, as fears of a global recession weakening the demand continued to loom over the market. However, the reopening of the Chinese economy has given markets reasons to be optimistic about a rebound in demand this year. Weakening US economic data has also bolstered bets for a slower pace of Federal Reserve rate hikes, with Fed officials advocating for a 25 basis point hike next week. On the supply side, the EU and G7 nations will cap the prices of refined Russian products starting in February, on top of the price cap on Russian crude that has been in effect since December and the EU embargo on imports of Russian oil by sea.

 

 

 

 

- WTI crude oil - chart (D1), Resistance (target zone) around ~  Support (target zone) around  ~ 

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS: Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS) The Dow rose more than 100 points on Tuesday, while the S&P 500 and Nasdaq 100 fell 0.1% and 0.3%, respectively, as investors digested a batch of economic data and earnings while recession fears remained. The latest flash U.S. PMI data showed business activity in both manufacturing and services remained below double digits, amplifying the impact of tighter financial conditions on growth and reinforcing bets the Fed will ease the pace of tightening. On the corporate front, industrial giant 3M tumbled more than 6.2 percent after reporting a drop in profit, while General Electric rose 1.1 percent after reporting quarterly results that beat expectations. Meanwhile, Johnson & Johnson reported a 25% drop in fourth-quarter revenue and lower sales as it posted a slight loss due to lower demand for a Covid-19 vaccine. After the bell rang, all eyes turned to Microsoft's report. The Canada S&P/TSX Composite closed at 20,629 on Tuesday, almost unchanged from the previous session. A slew of U.S. corporate earnings misses underscored concerns that high-interest rates hamper corporate performance. Still, U.S. PMI data showed a slower-than-expected contraction, alleviating concerns about tightening policy. Consumer discretionary fell 0.7 percent, while energy and technology.SPLRCT fell 1 percent each. On the other hand, base metals and health care rose 0.4 percent and 0.2 percent, respectively, while financials rose 0.1 percent. Investors await the Bank of Canada's policy decision tomorrow, with money markets pricing in a quarter-point hike in interest rates, hoping the bank's tightening cycle is over.  The Baltic Exchange's dry bulk shipping index, which measures the cost of shipping goods around the world, fell for the sixth consecutive session on Tuesday, falling about 2.6% to a more than 2-year low and a half of 721 points due to normal seasonality combined with an earlier than usual Lunar New Year holiday. The Capesize index, which tracks iron ore and coal cargoes of 150,000 tons, slipped about 6.8% to a new four-month low of 685 points; and the Panamax index, which tracks about 60,000-70,000 tons of coal and grain cargoes, fell about 1.2% to a more than two-year low of 1,035 points. Among the smaller ships, the supramax index snapped its more than a-month-long losing streak, gaining four points to 649 points. European shares edged lower on Tuesday, with the pan-European STOXX 600 down 0.2%, led by losses in healthcare and oil and gas stocks. Meanwhile, Germany's DAX closed little changed at 15,100. The stronger-than-expected PMI data bolstered expectations that the European Central Bank will maintain its positive stance on inflation. The latest survey showed that business activity in the eurozone returned to growth after six straight months of decline, with business confidence posting its biggest gain since the coronavirus outbreak despite high inflation and rising borrowing costs. Also, German consumer sentiment improved for the fourth straight month going into February as energy prices fell. On the corporate front, peripheral computer maker Logitech International said sales fell 22% in the third quarter, confirming preliminary results. Swiss watchmaker Swatch Group reported sales growth in 2022 of 2.5% and expressed a positive attitude towards the recovery of the Chinese market. On Tuesday, the FTSE MIB index rebounded in late trading to close at 25,885 points, up 0.2%, close to the 11-month high hit last week, as investors digested a batch of economic data and continued to assess the European Central Bank's monetary policy outlook, the bank said. and utility support. Despite concerns about persistently high inflation, the latest data from euro zone PMIs supported the idea of a milder recession than previously feared. Meanwhile, Panetta, governor of the Bank of Italy and member of the ECB's executive board, said it was too early to judge the size of the central bank's decision in March, despite recent signs of a 50-basis-point hike starting next week. Banks benefited from higher BTP prices, with Intesa Sanpaolo up 2 percent, UniCredit, and BPER Banca up 1.5 percent each. Meanwhile, utility providers recorded gains on lower TTF contract prices. The CAC 40 index reversed course and closed at a one-week high of 7,051, up about 0.3%, as investors welcomed upbeat economic data from the eurozone while weighing future moves by the European Central Bank. Preliminary Eurozone PMI beat forecasts and pointed to a return to growth in private sector activity. In France, manufacturing also returned to growth, while services continued to decline. Among the top gainers, ad agency network Publicis Groupe jumped nearly 3 percent after it announced the appointment of Demet Ikier as its EMEA chief operating officer (COO). In addition, utilities grew steadily, with Engie and Veolia Environnement up 2.8% and 1.6%, respectively. In contrast, Essilorluxottica underperformed (-1.8%). The Ibex 35 rose 0.2% to 8,968 on Tuesday, hitting its highest closing level since November 2021 and extending a 0.3% gain from the previous session as investors digested a batch of new PMI data from major European economies and assessed the outlook for the global market growth and monetary policy. The latest PMI survey showed that economic activity in the Eurozone is picking up again after six months of decline. While, German consumer morale also improved, rising for a fourth month in February mainly due to lower energy prices. On a global scale, traders weighed expectations of slower rate hikes from the US Federal Reserve against the prospects of an aggressive stance from the European Central Bank. Domestically, most stocks closed in profit, led by Logista (3.19%) and Indra Sistemas (1.90%). Repsol was the laggard, down 1.45%. London stocks rose for a second day on Tuesday, dragged down by the healthcare and energy sectors, with the blue-chip FTSE 100 closing around 7,760. The flash PMI survey showed the biggest drop in business activity in two years, mostly reflecting weaker service sector performance. The British government posted a record deficit in December as debt payments, and spending on energy support programs rose. AstraZeneca fell more than 2%, making it one of the biggest losers. On Tuesday, the Nikkei 225 gained 1.46% to close at 27,299, while the broader Topix added 1.42% to 1,973, its third straight gain and tracking another gain on Wall Street amid concerns over the pace of Fed rate hikes. Smaller expectations boosted technology and other growth stocks. Japanese stocks also built on last week's gains as the Bank of Japan stuck to its ultra-low interest rate policy despite rising inflation and mounting pressure for further policy adjustments. Again, technology stocks led the gains, with Tokyo Electron (2%), SoftBank Group (3.4%), Keyence (1%), Advantest (3.1%), and Mercari (1.9%) posting strong gains. Almost all other sectors were up, with index heavyweights such as Mitsubishi UFJ (2.5%), Sumitomo Mitsui (2.4%), Sony Group (1.9%), Oriental Land (2.8%), and Toyota Motor (1.2%) notable gains. The New Zealand ANZ 50 index fell 15.80 points, or 0.11%, to end at 11,932.92 on Tuesday, giving up gains made in early trade to end lower for a second day in a row as traders scrambled after the index hit a nine-month high recently. Attempt to record profits. Investor caution grew as New Zealand's services sector activity rose the least since April-December amid a drop in employment. Meanwhile, U.S. stock futures edged lower on Monday after a sustained rally on Wall Street, with traders anticipating a slew of economic data this week, including U.S. fourth-quarter GDP growth, new home sales, and the PCI price index. Tech, consumer durables, and financials fell, with Cannasouth Limited (-4.8%), MHM Automation (-4.6%), Briscoe Group (-1.7%), A2 Milk Co (-1.1%) and KMD Brands Ltd (- 0.9%) fell. On Wednesday, local media said just six days after Jacinda Ardern's abrupt resignation, Chris Hipkins would be officially sworn in as New Zealand's prime minister. The Australia S&P/ASX 200 rose 0.2% to around 7470 on Tuesday, its highest level in nine months, with technology and mining stocks leading the market. Australian shares also tracked Wall Street's overnight gains, as expectations of less aggressive Fed rate hikes boosted technology and other growth stocks. Stocks leading gains in the technology sector included Xero (2.5%), Block Inc (7%), Wisetech Global (1.6%), Brainchip Holdings (3.7%), and Sezzle Inc (7.3%). Zip Co also rose 8 percent after its revenue rose 12 percent to A$188 million in the December quarter. Heavyweight iron ore miners and clean energy-related companies also made gains, including BHP Billiton Group (0.9%), Rio Tinto Group (0.3%), Fortescue Metals (0.6%), Pilbara Mining Company (2.1%), and mineral resource companies (3.6%). The India BSE Sensex fell earlier on Tuesday to close above the 60,980 level, enough to extend the previous session's sharp rally, as investors digested a batch of corporate earnings and assessed expectations for next week's EU budget. Heavyweight automakers led gains, supported by a 3.2 percent rise in shares of the country's top automaker Maruti Suzuki, which beat profit estimates and improved margins in the December quarter. The technology sector also posted gains, tracking the U.S. Nasdaq's steady year-to-date gains as investors expect the Federal Reserve to slow down its pace of rate hikes. Meanwhile, banks ended mixed even as corporate results confirmed expectations for strong earnings in the sector. Axis Bank fell 2.4 percent despite third-quarter profit beating expectations, while HDFC Bank extended its choppy momentum to a 1 percent gain.   REVIEWING THE LAST ECONOMIC DATA: Reviewing the latest economic  news, the most critical data is: - NZ: In the fourth quarter of 2022, New Zealand's inflation rate increased by 7.20% year-on-year, unchanged from 7.20% in the third quarter of 2022. Food (10.7% vs. 8% in the third quarter), alcoholic beverages and tobacco (5.9% vs. 4.7%), household goods (8.2% vs. 7.1%), and health (8.2% vs. 7.1%) saw faster price increases. In contrast, inflation eased in housing and household utilities (8 percent to 8.7 percent) and transportation (8.2 percent to 7.1 percent). Meanwhile, communication costs fell (-0.3% vs. +3.1%), and the December quarter consumer price index rose 1.4%. - IT: Italian electricity prices rose above 200 euros per megawatt-hour, rebounding from an 11-week low of 150 euros hit on Jan. 18, as a brief cold front in the country boosted demand for natural gas, Italy's main power feedstock. Still, the cost remains well below the record high of 655 euros hit in early September, as a mild winter in Europe improved LNG supplies, and the win of long-term contracts from alternative sources spared Europe's dire situation from a supply shock from Russia. Moreover, after Moscow stopped gas supplies, the Italian government and energy giant Eni jointly pledged to increase energy investment in Algeria, aiming to expand the current TransMed pipeline and become Europe's energy import hub. Meanwhile, Italy's new government is raising its budget deficit to 4.5 percent of GDP next year to provide businesses and households with more than 21 billion euros in tax breaks and bonuses amid the energy crisis. - US: In January 2023, the Fifth District Services Activity Income Index increased to -6 from -12 in December. Also, the demand index rose to -6 from -12, and business expectations for income and demand over the next six months also improved. Firms' assessments of current and expected local business conditions improved slightly but remained low. The employment index rose (9 to -2), but firms' ability to find workers with the necessary skills showed slight improvement. Companies continue to raise wages and expect further increases in the near term. The average increase in prices paid increased slightly, while the rise in prices received decreased somewhat. The company expects both conditions to ease over the coming year. - US: An index of manufacturing activity in the Richmond area fell to -11 in January 2023 from 1 in December, the lowest reading since May 2020 and below market expectations of -5. Each of its three component indexes: shipments (-3 to 5 in December), new orders (-24 to -4), and employment (-3 to 3) all declined. The order backlog index fell further to negative, indicating that the backlog of companies continued to decline. At the same time, the supplier delivery time index is also well below 0, indicating that the delivery time continues to decline. The average growth rate of both prices paid and received declined in January. Expectations for two measures of price growth over the next 12 months also fell well below last year's levels. Companies were generally pessimistic about conditions in the next six months, although the local business conditions expectations index rose from December. - US: Preliminary estimates show that the S&P Global U.S. Services PMI rose to 46.6 in January 2023 from 44.7 at the end of 2022, above market expectations of 45.0. The latest data showed a steady decline in services sector output, but it was the weakest since October due to customer indecision and high inflation. Overall, the decline in new business was negligible, while employment rose only slightly, and the backlog of work shrunk further. On the price front, input cost inflation accelerated, and output price inflation was unchanged from December. Finally, business confidence hit a four-month high, hoping to improve demand conditions at home and abroad. - US: Preliminary estimates showed the S&P Global U.S. Composite PMI rose to 46.6 in January 2023 from 45.0 the previous month, suggesting the country's private sector contracted for the seventh straight month, but at the slowest pace since last October. Activity in services and manufacturing fell slower, although companies continued to highlight the impact of weak client demand and high inflation on client spending. Amid high inflation, rising interest rates, and customer hesitation, new orders fell for the smallest amount in three months, while employment rose slightly and a backlog of work steadily declined. On the price front, input cost inflation accelerated from December, snapping a seven-month streak of modest increases, while output cost inflation remained unchanged. Finally, as 2023 progresses, customer demand is expected to recover, and business confidence strengthens to its highest level in four months. - US: Preliminary estimates showed the S&P Global U.S. manufacturing PMI rising to 46.8 in January 2023 from 46.2 in December, beating market forecasts of 46. Still, the reading continued to point to a contraction in factory activity, the second fastest since May 2020, as manufacturing demand conditions remained subdued. Output shrank after new order inflows fell again sharply, with companies highlighting the impact of higher costs on customer demand. The decline in new business was the second fastest in two-and-a-half years, with companies cutting headcount for the first time since July 2020. On the price front, input costs rose quicker, ending a series of moderating cost inflation from mid-2022, while output prices also rose. Supplier performance deteriorated only slightly. However, commodity producers were more optimistic about the outlook as companies tried to acquire new customers through marketing and product launches. - UK: According to the latest Industrial Trends Survey from the Confederation of British Industry (CBI), the order balance at the Confederation of British Industry fell by 11 percentage points from the previous month to -17 in January 2023, at The lowest level since February 2021, also below market expectations of -8. The latest data also showed that order totals were below average for the sixth month, with companies reporting that orders or sales would limit output, the highest level since April 2021. In addition, the sub-index for export orders fell another three percentage points to -22, the lowest level since February 2021, while a measure of manufacturing output was little changed in the three months through January. On the price front, manufacturers' expectations for the next three months fell to their lowest level since September 2021 (+41 vs. +52 in December) as global supply chain pressures, labor shortages, and energy costs eased. - UK: The Confederation of British Industry's (CBI) quarterly optimism index in UK manufacturing improved to -5 in the first quarter of 2023 from -48 in the previous quarter, but still noted that most respondents felt much less confident about the prospects. Business and export optimism fell for the fifth quarter, but at a much slower pace than in the previous three months. - RU: In late January, as the Bank of Russia resumed its intervention in currency markets, the Russian ruble stabilized around 69 per dollar, holding above an eight-month low of 72.5 touched in the first week of January. The central bank sold $47 million worth of yuan to buy rubles after falling revenues from oil sales dampened capital inflows. Revenues from oil sales have fallen in the past few months after Western sanctions dampened demand in Europe and forced Russian producers to offer steep discounts to remaining Asian buyers. - EU: Preliminary estimates show that in January 2023, the S&P global euro zone services PMI rose to 50.7 from 49.8 in the previous month, higher than market expectations of 50.2. The latest data showed activity in the services sector expanded for the first month since July, driven by the technology, health care, and pharmaceutical sectors. However, industrial services also rebounded into growth territory. Meanwhile, recessions in financial services (genuine estate) and basic resources have eased. In contrast, consumer-facing sectors such as travel, entertainment, and home goods have stabilized after months of declines. New business to service providers fell only slightly, and job growth accelerated. On the price front, input cost inflation fell to an 11-month low while average selling price inflation rose. - EU: Preliminary estimates show that the S&P Global Eurozone Composite PMI rose to 50.2 in January 2023 from 49.3 in the previous month, above the market consensus of 49.8. The latest data showed business activity expanded for the first time since last June as activity in the services sector rebounded, driven by the technology, health care, and pharmaceuticals sectors, and a weak contraction in manufacturing activity. Overall, the decline in new orders and backlogs was the smallest in seven months, while employment rose faster in three months. On the price front, input costs rose at the slowest pace since April 2021, while prices rose quicker amid efforts to rebuild margins. Finally, business confidence registered its most significant monthly increase since June 2020 and the highest since last May. - EU: Preliminary estimates show that in January 2023, the S&P Global Eurozone Manufacturing PMI rose to 48.8 from 47.8 in the previous month, higher than market expectations of 48.5. The latest data showed factory activity contracting at its mildest pace since August 2022. New orders fall at the slowest pace since last May, though still a sharp drop; employment accelerates. Meanwhile, factories reported unchanged supplier lead times for the second straight month, in contrast to worsening supply conditions in the previous three years. On the price front, input cost inflation fell below its pre-pandemic average to the lowest level since October 2020, while average prices rose slightly. Finally, there was an improvement in optimism about the year ahead. - FR: A quick estimate puts the S&P Global France Composite PMI at 49 for January 2023, little changed from 49.1 in December and below market expectations of 49.5. The latest data showed that business activity in the French private sector economy fell for the third consecutive month, with continued weakness in the services sector (December PMI 49.2 to 49.5). On the other hand, manufacturing activity returned to growth after contracting for five straight months (PMI 50.8 vs. 49.2). Total new orders fell for the sixth consecutive month in January amid rising interest rates and a high-inflation environment. At the same time, employment rose for the fifth straight month, and job creation was picking up. On the price front, input cost inflation has slowly increased since February 2022. However, sales price inflation rose to a three-month high in January. Finally, business confidence rose to a six-month high. - DE: In January 2023, the S&P German global manufacturing PMI unexpectedly fell to 47 from 47.1 in December, compared with the consensus forecast of 47.9. According to preliminary estimates, the data showed factory activity contracting for the seventh straight month. Procurement activity by commodity producers continued to decline sharply, reflecting lower production requirements and the depletion of safety stocks as material supplies improved further. As a result, the average lead time for inputs decreased significantly, shrinking for the third consecutive month. In addition, manufacturing production extended losses, and employment growth weakened. On the other hand, as the supply chain pressure eased, the cost pressure slowed down. - DE: Preliminary estimates show that Germany's S&P Global Composite PMI rose to 49.7 in January 2023 from 49.0 the previous month, broadly in line with market expectations of 49.6. The latest data showed activity in the services sector rose for the first time since last June, contracting for the seventh straight month, although it was the mildest. Meanwhile, manufacturing production continued to decline. Overall inflows of new jobs fell at a more moderate pace, while the rate of job creation picked up slightly to a six-month high. Manufacturers' pre-production and post-production inventories fell for the first time in 16 and nine months, respectively. On the price side, both input and output costs have grown at a lower rate. Finally, business sentiment turned positive for the first time since last August, reaching its highest level since Russia invaded Ukraine last February. - DE: Germany's GfK consumer climate indicator rose to -33.9 in February 2023 from a slightly revised -37.6 in January, compared to -33.0 expected by the market. The latest reading, the highest since August 2022, points to an improvement in sentiment for the fourth straight month amid lower energy prices, with revenue expectations (-32.2 versus -43.4) and economic conditions (-0.6 versus -10.3) both improving. recovered. Meanwhile, willingness to buy fell slightly (-18.7 versus -16.3) as consumers anticipated higher heating bills in the coming months. The index hit an all-time low of -42.8 in October 2022. GfK consumer expert Rolf Bürkl said: "Falling energy prices have ensured consumer sentiment is less pessimistic. Nevertheless, 2023 will remain difficult for the domestic economy. Private consumption will not be able to contribute significantly to this year. contribute positively to the overall economic development of the country. This is also indicated by the fact that the level of this indicator remains low." - JP: The au Jibun Bank Japan Services PMI rose to 52.4 in January 2023 from the final reading of 51.1 in December, remaining expansionary for the fifth month in a row, pointing to a modest rise in services sector activity. The report pointed to the National Travel Discount Scheme and the recent easing of COVID-19 restrictions as major factors encouraging expansion in the services sector. However, employment levels fell for the first time in a year and reached the most significant level since May 2020. On prices, input cost inflation rose further in January, but companies raised selling prices at the most modest pace in five months. As a result, firms were reportedly concerned about pricing pressure and recorded the lowest level of business confidence in two years. - AU: The NAB Business Confidence Index in Australia rose 3 points to -1 in December 2022, remaining in negative territory for the second consecutive month and below the long-term average. Sentiment strengthened across most sectors except transportation and utilities. Meanwhile, business conditions fell in the third month (12 to 20 in November) as sales (18 to 27), profitability (12 to 19), and employment (8 to 11) fell. Conditions declined broadly, with moderation across all sectors. Leading indicators suggest that conditions may ease further, with forward orders gradually falling (3 to 5) and capacity utilization easing, although remaining above the 83.7% average. Price and cost growth has slowed but are still rising. NAB Chief Economist Alan Oster said: "While economic activity remains steady, there is a marked slowdown in momentum. We know the full impact of interest rates has yet to be felt, so the survey should show signs of growth in the coming months. The accelerating impact of interest rates.” - AR: Argentina's economic activity estimator rose 2.6% year-on-year in November 2022, slowing from a 4.5% increase the previous month. It was the slowest annual growth since February 2021, led by weaker performance across most sectors. The slowdown in economic activity was recorded in the mining and quarrying sectors (+9.5% vs +12.8% in October), hotels and restaurants (+22.1% vs +27.8%), wholesale, retail trade and repairs (+3.5% vs 5.5%), and transport (+2.6% vs. 6%), real estate, trade and leasing (+3.6 vs. 3.8%) and manufacturing industry (+2.0% vs. +3.9%).On the other hand, agriculture (-6.3% vs. -0.2%), financial intermediation (-3.3% vs. -1.8%), and fishing (-16.8% vs. - 29.6%). On a seasonally adjusted monthly basis, Argentina's economy contracted by 0.7% in November. - HU: The National Bank of Hungary kept its base rate unchanged at 11% for the fourth consecutive decision at its January 2023 meeting, in line with market expectations and previous signals. Currently, the instrument to counter the rise in inflation and the weak guilder is the one-day deposit at a rate of 18%, which was extraordinarily created in October, also unchanged at the shareholders' meeting, effectively replacing the base rate. The facility was created when a weakening local currency and high energy prices prompted Hungarian Prime Minister Viktor Orban to pressure the central bank into taking emergency measures. As a result, Hungary's annual inflation rate rose to 24.5% in December 2022, the highest over 26 years.   LOOKING AHEAD: Today, investors should watch out for the following important data: - CAD: BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, and BOC Press Conference. - CNY: Bank Holiday. - CHF: Credit Suisse Economic Expectations. - AUD: MI Leading Index m/m, CPI q/q, CPI y/y, and Trimmed Mean CPI q/q. - GBP: PPI Input m/m, and PPI Output m/m. - EUR: German IFO Business Climate, and Belgian NBB Business Climate. - USD: Crude Oil Inventories  - AUD: Bank Holiday.   KEY EQUITY & BOND MARKET DRIVERS: Кey factors in the stock and bond market are currently: - US: Stock futures contracts linked to the three major indexes fell about 0.5% on Tuesday as investors digested a string of earnings results while awaiting the release of critical economic data. Industrial conglomerate 3M tumbled nearly 5% in pre-market trading after reporting a drop in profit. Johnson & Johnson fell almost 1% even as the pharmaceutical giant reported better-than-expected quarterly results and guidance. Meanwhile, General Electric shares rose 2% after reporting results that surprised investors. Now, all eyes are on Microsoft, which will report earnings after the close. Beyond that, the S&P Global PMI later today will spark the debate over whether the world's largest economy is headed toward recession or already in it. In regular trading on Monday, the Nasdaq Composite rose 2.01%, the S&P 500 rose 1.19%, and the Dow rose 0.76%, with all three benchmarks turning positive again this year. - RU: Yields on Russia's 10-year OFZ bonds rose more than 10.5% in late January, the highest level since a brief peak of 11% in late September caused by Russia's military mobilization, as concerns over the Kremlin's fiscal sustainability mounted. The steep discounts on Urals oil continue to jeopardize the budget law passed by President Putin, which aims to generate an additional 8 trillion rubles in revenue from energy by 2025. The document assumes oil will sell for $70 a barrel rather than the recent sub-$40 price. The law also allocated 2.9 trillion rubles to Russia's Rainy Day State Welfare Fund, an unprecedented move that underscores the unsustainability of rising debt. Meanwhile, the federal government posted a record 3.9 trillion ruble budget deficit in December, wiping out a surplus for the first 11 months of 2022, as public revenues dwindle and spending increases for Russia's invasion of Ukraine. - UK: U.K. 10-year government bond yields fell back to 3.3%, hovering near their lowest level since Dec. 14, as weaker-than-expected PMI data highlighted the risk of a U.K. recession and cast doubt on the Bank of England's policy path. British business economic activity fell at the fastest pace in two years in January, the latest survey showed, citing weaker consumer demand amid rising interest rates, strikes, and rising living costs. Investors are confident the Bank of England will raise interest rates again to 4% at its next meeting but are divided on how much further borrowing costs will rise beyond that level. Meanwhile, UK consumer price inflation fell to 10.5% in December as expected but remained well above the Bank of England's 2% target, while core interest rates were near October's record high; while the latest employment report showed that Wages in the UK are growing at the fastest pace on record, excluding growth during the COVID-19 pandemic.   LEADING MARKET SECTORS: - Strong sectors: Industrials, Utilities, Real Estate, Consumer Staples, Financials. - Weak sectors: Communication Services, Health Care, Energy, Consumer Discretionary.   TOP CURRENCY & COMMODITIES MARKET DRIVERS:  Кey factors in the currency and commodities market are currently: - OIL: U.S. crude inventories rose by 3.378 million barrels for the week ending January 20, 2023, after rising by 7.615 million barrels in the previous week, according to the American Petroleum Institute. That exceeded analysts' expectations for an increase of 1.6 million barrels. Brent crude futures fell more than 1% to below $87 a barrel on Tuesday, retreating from a more than one-month high of $89.1 hit in the previous session as fears of a global recession weakening demand continued to loom over the market. However, the reopening of the Chinese economy has given markets reasons to be optimistic about a rebound in demand this year. Weakening US economic data has also bolstered bets for a slower pace of Federal Reserve rate hikes, with Fed officials advocating for a 25 basis point hike next week. On the supply side, the EU and G7 nations will cap the prices of refined Russian products starting in February, on top of the price cap on Russian crude that has been in effect since December and the EU embargo on imports of Russian oil by sea. - GBP: Sterling fell to $1.23 from a near six-week high of $1.245 hit on Jan. 23 after weaker-than-expected data highlighted the risk of Britain slipping into recession. The latest PMI survey showed that British business economic activity fell at the fastest rate in two years in January, with rising interest rates, strikes, and weak consumer demand due to rising living costs. On the policy front, the Bank of England will raise interest rates by half a percentage point to 4.0% at its February policy meeting in response to double-digit inflation. However, markets are divided on how much further to rise in rates, while they expect bank rates to peak at around 4.5% by the middle of the year. Data last week showed UK inflation moved further away from October's 41-year high but remained well above the central bank's 2 percent target. Elsewhere, investors saw the Federal Reserve less aggressive following the release of dismal U.S. economic data. - USD: The U.S. dollar index held below 102 on Tuesday, hovering near its lowest level in nearly eight months, as rising risks of a U.S. recession and expectations of less policy tightening by the Federal Reserve weighed on the greenback. Recent U.S. economic data suggests that the overall economy is facing rising headwinds. Meanwhile, moderation in U.S. inflation has fueled speculation that the Fed will further slow the rate hikes, with money markets now pricing in more than a 95% chance the central bank will raise the Fed funds rate by a quarter point at its next meeting. Federal Reserve President Christopher Waller also said that the upcoming rate change and the expected continued decline in inflation brought policy close to "adequate restraint." Investors are now looking ahead to a slew of U.S. data that may offer clues to the path of interest rates, including fourth-quarter GDP growth, durable goods orders, the PCE price index, and personal income and spending data. - GAS: US natural gas futures fell below the $3.3/MMBtu threshold, hovering near levels not seen since June 2021, on expectations of lower demand after forecasts pointed to warmer weather in the next two weeks. Meanwhile, Freeport LNG, the US's second-largest LNG exporter, said earlier this week that it had finished repairs to its plant and asked US regulators for permission to take initial steps to restart the inactive plant.US natural gas prices have fallen more than 30% since the start of 2023 and are now nearly 70% below their August peak of $10 as warmer weather delayed the winter heating season. - CRN: Chicago corn futures held above $6.7 a bushel, not far from a more than two-month high of $6.8 hit on Jan. 17 amid supply chain disruptions, rising input costs, and increasing global demand. The ongoing war in Ukraine, which accounts for 15% of global corn exports, with late planting in the United States and dry weather in South American countries, continued to weigh on production. As a result, the U.S. Department of Agriculture estimated total corn production in 2022 at 11.730 billion bushels, down 1.4% from last November's estimate and 9% from the 2021 estimate of 15.074 billion bushels. Meanwhile, demand from major consumers in the US and China, particularly in sectors such as animal feed, has seen further recovery. In addition, China is set to ramp up corn purchases after it reopens its economy following prolonged COVID-19 lockdowns.   CHART OF THE DAY: WTI crude oil futures fell more than 1% to below $81 a barrel on Tuesday, down from a more than one-month high of $82.7 hit in the previous session, as fears of a global recession weakening the demand continued to loom over the market. However, the reopening of the Chinese economy has given markets reasons to be optimistic about a rebound in demand this year. Weakening US economic data has also bolstered bets for a slower pace of Federal Reserve rate hikes, with Fed officials advocating for a 25 basis point hike next week. On the supply side, the EU and G7 nations will cap the prices of refined Russian products starting in February, on top of the price cap on Russian crude that has been in effect since December and the EU embargo on imports of Russian oil by sea.         - WTI crude oil - chart (D1), Resistance (target zone) around ~  Support (target zone) around  ~