GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

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

European stocks closed slightly lower on Wednesday, extending losses from the previous session, with the benchmark Stoxx 600 down 0.3% and Germany's DAX closing below 15,085. Technology stocks were the worst performers under pressure from Microsoft Corp. On the other hand, utilities and insurance companies rose. In addition, the airliner outperformed after EasyJet predicted it would beat current market expectations for 2023 and be profitable for the full year. Among other corporate headlines, the Financial Times reported that Apollo Global Management Inc. and former SoftBank Group Corp. executive Marcelo Claure were exploring buying Millicom Inc. International Cellular SA deal, which could value the company at close to $10 billion. ASML Holding NV reported better-than-expected profit and said the threat of export controls was growing. Sentiment in the Old Continent soured this week amid growth concerns and expectations that the European Central Bank will maintain its aggressive stance against inflation. The CAC 40 index was little changed, around 7040 on Wednesday, in line with regional peers, as investors weighed earnings reports on concerns about further tightening by major central banks. On the data front, the number of registered unemployed people in mainland France rose slightly by 26,000 to 2.817 million in December 2022 from an 11-year low last month. In corporate headlines, train maker Alstom reported an 8% rise in third-quarter sales to 5.15 billion euros, while Airbus Helicopters reported lower orders for fiscal 2022 but deliveries. also increased. Meanwhile, BNP Paribas has announced that it will enter a new phase to accelerate its energy transition financing activities significantly. The group plans to provide 40 billion euros in outstanding financing for producing low-carbon, mainly renewable energy, by 2030. The FTSE MIB closed flat on Wednesday at 25,875, maintaining gains from the previous three sessions, as gains in banks and technology stocks offset losses in energy and industrials. Business guidance in Europe and the U.S. weighed on overall sentiment as central banks continued to signal a hawkish outlook. On the other hand, business conditions in Germany and investor sentiment in Switzerland improved in January, while producer inflation in the UK and Spain eased to multi-month lows in December and downplayed recession risks. Interpump Group fell 3 percent to lead the decline in industrials, while Diasorin and Amplifon were down nearly 1 percent each, dragging down the healthcare sector, despite Jeffries upgrading the latter. On the other hand, banks posted gains despite a drop in Italian bond prices, extending yesterday's gains. Elsewhere, Iveco rose 3 percent after it announced it would supply Belgium with 500 electric buses by 2026.  

The Baltic Dry index, which measures the cost of shipping cargo worldwide, tumbled for the seventh consecutive session to around 703 points, its lowest level in two-and-a-half years, driven by weak demand for capsized vessels. The capesize index, which tracks iron ore and coal cargoes of 150,000 tonnes, fell 631 points, its lowest since June 2020. The supramax index dropped 1 point to 648.

London stocks remained under pressure on Wednesday, with the blue-chip FTSE 100 closing below 7,750, weighed down by economically sensitive sectors such as industrials and consumer discretionary. The index has been struggling after a recent rally as investors grew increasingly concerned about Britain's bleak economic outlook. Regarding individual share price movements, online retailer Ocado was one of the biggest losers, down almost 5%. On the other hand, Aviva shares rose about 3% after the insurer maintained its dividend guidance and outlook for capital returns.

The ruble-based MOEX Russia index closed at 2,170 on Wednesday, extending losses for a second session under pressure from energy producers and banks as Russia's economic isolation continued to hurt growth prospects. Financial firms halted a three-day rally to lose an average of 0.5 percent. Still, the sector is up 6% this year, thanks to solid year-end results from Sberbank and the addition of several Chinese and Hong Kong securities on the Saint-Petersburgh Exchange. Energy companies also posted losses, extending year-to-date to more than 3 percent due to deep discounts on Urals oil. In addition to the recent EU oil embargo and G7 price caps on seaborne crude exports, the group will extend restrictions to seaborne exports of diesel, jet fuel, and other refined products on Feb. 5. On the other hand, shares of mining company Polymetal surged 4% after reporting strong fourth-quarter results.

Canada's main stock index fell nearly 1% to close below 20,500 on Wednesday, tracking Wall Street's decline as weak earnings highlighted the impact of rising borrowing costs on corporate results. Meanwhile, investors digested the central bank's latest monetary policy decision. The People's Bank of China raised borrowing costs by 25 basis points and signaled that the tightening cycle would end as expected if the economy develops broadly in line with the outlook. Industrials and energy were the worst-performing sectors, while technology outperformed.

The Dow fell nearly 300 points on Wednesday, while the S&P 500 and Nasdaq 100 fell 1.2 percent and 1.9 percent, respectively, as disappointing earnings added to fears of a possible recession. Shares of Microsoft (MSFT), the second-largest U.S. company by value, fell more than 3% as the tech bellwether posted its slowest sales growth in more than six years. Boeing fell about 3% after the plane maker missed profit and revenue estimates. AT&T, on the other hand, rose nearly 4% after earnings beat analysts' expectations. All eyes now turn to Tesla and IBM, which will report earnings after the close. Investors are increasingly worried about the possibility of a recession, as higher borrowing costs keep more companies from growing while slowing sales force some to lay off workers.

The Japan Nikkei 225 gained 0.35% to close at 27,395 on Wednesday. In comparison, the broader Topix gained 0.39% to close at 1,981 on Wednesday, extending a fourth straight session of gains as the Bank of Japan weighed on surging inflation. Under huge market pressure, it is still committed to an ultra-low interest rate policy. Meanwhile, analysts warned that Japanese stocks could come under pressure as the market widened while global economic uncertainty continued to weigh on sentiment. Index heavyweights such as Nippon Steel (4.5%), Keyence (1.7%), Nippon Yusen (2.1%), Kawasaki Kimori (3.6%), and Daikin Industries (1.1%) rose sharply. In corporate news, Nidec Corp fell 5.4% after slashing its full-year operating profit forecast by almost half on weaker demand and a slower-than-expected recovery in the global auto industry.

On Wednesday, the New Zealand ANZ 50 index rose 66.80 points, or 0.56%, to close at 11999.72 points, the highest closing point since early April 2022, ending Labor leader Chris Hipkins's (Chris Hipkins) surprise last week. The fall came two days after he resigned and was sworn in as New Zealand's 41st prime minister. According to reports, Hipkins will hold his first cabinet meeting later today and vowed to focus on the economy, especially inflation. Meanwhile, the latest figures show New Zealand's annual inflation rate was unchanged at 7.2% in the final quarter of 2022, staying near its highest level in more than 30 years. U.S. stocks struggled on Tuesday, with markets in China and Hong Kong closed for the Lunar New Year holiday. Health services, financials, consumer durables, and utilities led gains, with Ryman Healthcare (4.1%), Meridian Energy (2%), Kiwi Property Group (1.6%), Port of Tauranga (1%), and Ebos Group Ltd (0.8%) ) rose strongly.

The Australia S&P/ASX 200 rose 0.2% to above 7,500 on Wednesday, reaching its highest level in nine months, helped by gains in financial and gold stocks. Investors are also looking ahead to Australian consumer price data due later in the day, which is expected to show that inflation has peaked in the fourth quarter, supporting the case for a slower pace of rate hikes or even a pause. Gold stocks led the market higher, with industry leaders Newcrest Mining and Northern Star Resources up 1.9 percent and 1 percent, respectively. Financial heavyweights also gained, including Commonwealth Bank (0.7 percent), ANZ Banking Group (0.8 percent), Westpac (0.4 percent), NAB (0.4 percent), and Macquarie Group (1 percent). Meanwhile, on Wednesday, iron ore miners, energy companies, and lithium stocks were mostly lower.

The India BSE Sensex fell 770 points in early trade to 60,205 on Wednesday, its worst session in more than a month, weighed down by Adani Group shares, as investors continued to assess expectations ahead of next week's EU budget. Stocks fell after US short-seller Hindenburg reported that companies controlled by the Adani Group had significant debt problems, although not directly into the Sensex, as losses in multiple sectors of the benchmark index were felt. State Bank of India and IndusInd Bank fell more than 4% each on the index. On the other hand, automakers continued to outperform, supported by Maruti Suzuki's strong earnings report yesterday. BSEC will be closed on Thursday due to a local holiday.

South African equities extend losses for the second session. The JSE FTSE All Share Index closed down 0.3% at 73,711 on Wednesday, extending a 0.1% loss in the previous session. On Thursday, investors cautiously awaited the South African Reserve Bank's monetary policy decision. The central bank is widely expected to deliver a 50 basis point rate hike, following a 75 basis point hike in November. This would take borrowing costs to 7.5%, the highest since June 2015. Among sectors, healthcare stocks fell more than 2%, followed by technology stocks (-1.4%). Conversely, basic materials gained 0.8%, and energy shares rose 0.3%.

Brazil's Ibovespa stock index erased early gains. It climbed 0.5% to 111,653 on Wednesday, the most in more than two months, with support from banks and retailers as investors watched economic data and speeches of President Lula at the summit in Uruguay. Shares of retail giant Americanas soared 20% after sharing a list of more than 8,000 creditors to back BRL 41 billion debt from its recent accounting scandal. However, its shares remain below BRL 1, up from BRL 12 two weeks ago. Meanwhile, shares of Banco do Brasil jumped 2.4%, bringing gains for the financial sector. On the data front, the FGV Consumer Confidence Survey showed a deterioration in consumer expectations for the coming months.

 

REVIEWING THE LAST ECONOMIC DATA:

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

- TR: Turkey's manufacturing confidence index rose for the first time in three months, reaching 101.7 in January 2023, the highest since August 2022, from December's 30-month low of 97.8. The latest reading reflects an improvement in expectations in the next three months regarding production (111.4 vs. 102.7 in December) and the export order book (111.9 vs. 100). At the same time, the indicator for both fixed investment spending (116.5 from 115.5) and general business sentiment (91.2 vs. 87.6) strengthened. Conversely, expectations of total employment worsen (106.0 vs. 106.4).

- RU: Russian producer prices fell by 3.3% year-on-year in December 2022, following a 1.9% drop in the previous month. It was the most significant drop since June 2020, as the Russian economy shrank sharply and energy supplies rose due to falling foreign demand. Miner costs fell faster (-15.3% vs. -12.3%), and manufacturing costs fell (-0.9% vs. 0.6%). On the other hand, water suppliers (10.2% vs. 4.9%) and electricity, gas, steam, and air conditioning suppliers (6.9% vs. 5.1%) saw further price increases. On a monthly basis, the producer price index f fell 0.8%, extending the 0.4% drop in November.

- US: The latest report from the U.S. Energy Information Administration showed that U.S. crude oil inventories rose by 533,000 barrels in the week ended January 20, slightly below market expectations of 97.1 million barrels. Meanwhile, crude inventories at the Cushing, Oklahoma, delivery hub rose by 4.267 million barrels, the most since April 2020, after rising by 3.646 million barrels in the previous week. Also, gasoline inventories rose by 1.763 million barrels, compared to forecasts for a build of 1.767 million barrels. On the other hand, distillate inventories, which include diesel and heating oil, fell 507,000, below expectations for a 1.121 million draw.

- CA: As expected, the Bank of Canada raised its overnight rate target by 25 basis points to 4.5% at its first meeting in 2023 and signaled that its aggressive tightening cycle would end if the economy developed broadly in line with the central bank's outlook. The Bank added that it would also continue to implement quantitative tightening to complement the restrictive stance of the policy rate. Policymakers stressed that households continued to feel pressure from rising inflation as food and housing prices accelerated further. However, lower gasoline prices pushed inflation down to 6.3 percent in December from a peak of 8.1 percent in June. Still, short-term inflation expectations are rising but are expected to fall sharply later this year. Meanwhile, the bank estimates that the Canadian economy will grow by 3.6% in 2022 but may stall in the middle of the year before growth picks up again in the year's second half.

- EU: Electricity prices in Germany, which are close to the €200/MWh level, fell below €10 in mid-January due to increased demand and reduced wind capacity. Meanwhile, Germany plans to spend 14.5 billion euros to fund its electricity tariff caps by May. In addition, Germany announced a cap on household electricity prices of 40 cents per kWh, or 80% of actual consumption. Still, prices remain well below the December peak of €450/MWh, while natural gas prices have fallen sharply, and electricity consumption has fallen due to high energy prices and warmer-than-usual temperatures.

- UK: Hot weather in Britain and Europe in recent months has dampened demand and eased pressure on the country's energy system, with electricity prices in the UK falling below 150 pounds per megawatt-hour, close to their highest level since September 2021. The UK's ample energy supply and falling gas prices have also been key drivers of lower electricity prices. Meanwhile, households and businesses have been cutting energy after National Grid warned in October of supply shortages during the harsh winter. Usage amount. On the policy front, the UK has committed around £60bn in energy bill aid to households and businesses until April 2023.

- UK: In December 2022, the ex-factory price of goods produced by UK manufacturers rose 14.7% year-on-year, down from 16.2% in November. That marked the lowest producer inflation since March and eased for the fifth straight month. However, four of the 10 product categories dragged down the growth rate, with a decline in petroleum equipment contributing the most at negative 3.12 percentage points. As a result, on a monthly basis, producer prices for output fell 0.8% in December, the most significant drop since April 2020, after falling 0.1% in November, missing market forecasts of 0.3%.

- FR: The number of people registered as unemployed in mainland France rose slightly by 26,000 to 2.817 million in December 2022 from an 11-year low in the previous month. The increase was due to a 76,000 increase in the number of unemployed young people under 25. Unemployment, on the other hand, fell by 11,000 to 1.64 million for people aged 25 to 49 and by 300,000 to 803,200 for those 50 or older. Compared to the previous year's month, 260,000 fewer people were registered as unemployed.

- GE: Germany's Ifo business climate indicator rose 1.6 points from the previous month to 90.2 in January 2023, the fourth consecutive monthly increase and the highest since last June. Europe's largest economy started the year with cautious optimism amid easing inflation and an improving outlook as pressure on supply chains eased. As a result, expectations for the coming months were significantly less pessimistic (86.4 versus 83.2 in December), while businesses' assessments of their current conditions were slightly more negative (94.1 versus 94.4). By industry, manufacturers (-0.7 vs. -5.7), service providers (0.2 vs. -1.2), traders (-15.4 vs. -20.0), Ifo expects a slight contraction in the first quarter, mainly due to consumption decline, but a recession may be avoided.

- SW: In December 2022, Sweden's annual producer inflation rate fell to 18.7% from 19.5% in the previous month. Prices of energy-related products (45.1% vs. 50.5% in November), consumer goods (14.8% vs. 16.4%), and capital goods (12.8% vs. 11.9%) rose at a slower pace. Excluding energy-related products, producer prices rose 11.4%. On a monthly basis, producer prices edged up 2.1 percent in December after rising 2.0 percent in November.

- AU: As of December 2022, Australia's monthly consumer price index (CPI) index has accelerated from 7.3% in November to a new peak of 8.4%, exceeding the market consensus of 7.6%. Upward pressure came primarily from housing costs (10.1% vs. 9.6% in November), with new dwellings surging 16.0%; food and non-alcoholic beverages (9.5% vs. 9.4%), with costs rising across all subcategories; transportation (7.3% vs. 9.0%), driven by motor fuel; (10.8% vs. 8.4%); and entertainment and culture (14.4% vs. 5.8%), boosted by record holiday travel and lodging prices (29.3%). The monthly CPI index, which excludes volatile items such as fruits, vegetables, and fuels, increased to 8.1 percent in December, the highest since December 2018, from 6.7 percent in November. Inflation remains well above the Reserve Bank of Australia's 2-3% target range.

- AU: In December 2022, Australia's Westpac Melbourne Institute Leading Economic Index (Westpac Melbourne Institute Leading Economic Index) fell slightly by 0.1%, the same decline as the previous month. Meanwhile, the index's six-month annualized growth rate was -0.97% in December, essentially unchanged from November's figure and marking the fifth consecutive month of negative growth. "The main driver of the slowdown will be consumers as rising interest rates and negative real wage growth weigh on spending," Westpac chief economist Bill Evans said. "However, there is unusual uncertainty about this outlook, particularly in the household sector, where the large surplus of savings accumulated during the pandemic has provided a buffer against rising interest rates and cost-of-living pressures, especially for households in higher income groups .”

- 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. Prices rose faster in 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%). 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%.

- BH: The annual inflation rate in Bosnia and Herzegovina fell to 14.8% in December 2022, down from 16.3% in November and reaching its lowest levels in 7 months. Prices increased at a slower pace for food and soft drinks (23.2% vs. 24.5% the previous month), housing and utilities (16.9% vs. 19.1%), transport (17. 2% vs. 23.8%) and communications (1.4% vs. 23.8%). % versus 1.5%), while down for clothing and footwear (-7.3% vs. -7.1%). Conversely, costs grew fastest for recreation and culture (11.6% vs. 11.5%), restaurants and hotels (11.1% vs. 11%), and other goods and services (8.6% vs. 8,1%). On a monthly basis, consumer prices fell 0.6% after rising 0.2% in November.

- GE: Germany's Ifo Business Climate indicator rose 1.6 points from the previous month to 90.2 in January 2023, the fourth consecutive increase and the highest level since June last year. Europe's largest economy started the year with cautious optimism as inflation eased and the outlook improved as tensions over supply chains eased. As a result, expectations for the coming months are significantly less pessimistic (86.4 vs. 83.2 in December), while companies' assessments of their current situation have become slightly more negative (94.1 vs. 94.4). By sector, sentiment improved among manufacturers (-0.7 vs. -5.7), service providers (0.2 vs. -1.2), traders (-15.4 vs. -20.0) and manufacturers (-21.6 vs. -21.9). Nevertheless, the Ifo expects a slight contraction in the first quarter, mainly due to a decline in consumption.

- LT: Industrial production in Lithuania fell by 7.7 percent in December 2022 after showing no growth in the previous month's revised figure and marking the most significant drop since May 2020. (percent) and water supply, sewage, and waste management (-2.8 percent). On the other hand, the production of electricity, gas, steam, and air conditioning increased (10.1 percent). Considering the full year, industrial production increased by 9.5% over the previous year. On a seasonally adjusted monthly basis, industrial production decreased by 4% from the revised growth of 0.4% in November.

- SW: Annual producer price inflation in Sweden slowed to 18.7% in December 2022 from 19.5% the previous month. Prices increased at lower rates for energy products (45.1% against 50.5% in November), consumer goods (14.8% against 16.4%), and capital goods (12.8% against 11.9%). Excluding energy-related products, producer prices increased by 11.4%. On a month-to-month basis, producer prices rose 2.1% in December, following a 2.0% increase in November.

 

LOOKING AHEAD:

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

- USD: Advance GDP q/q, Advance GDP Price Index q/q, Core Durable Goods Orders m/m, Durable Goods Orders m/m, Unemployment Claims, Goods Trade Balance, Prelim Wholesale Inventories m/m, New Home Sales, and Natural Gas Storage.

- EUR: Spanish Unemployment Rate.

- GBP: CBI Realized Sales.

- JPY: BOJ Summary of Opinions, and SPPI y/y.

- CNY: Bank Holiday.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- CA: The Canadian 10-year government bond yield fell below 2.8%, near a five-month low of 2.72% hit on Jan. 18, after the Bank of Canada announced the end of its tightening policy. The bank raised its key interest rate by 25 basis points in its January policy decision. It said it would keep borrowing costs unchanged to assess the impact of cumulative rate hikes on the Canadian economy. The move follows 425 basis points of rate hikes since March 2022 to curb inflation, which peaked at 8.1% in June after lower fuel prices and monetary tightening slowed full-year price growth to 6.3% in December. %. Meanwhile, Bank of Canada policymakers expect the Canadian economy to stagnate in early 2023 before picking up again towards the end of the year, with a growth of 1% in 2023 and 2% in 2024.

- US: Stock futures contracts tied to the blue-chip Dow fell 0.7% on Wednesday, while those tied to the S&P 500 and Nasdaq fell 0.8% and 1.1%, respectively, as investors monitored a flurry of corporate earnings data. Microsoft fell more than 2 percent in premarket trading after the software giant posted its slowest sales growth in more than six years. Boeing fell about 2 percent after recording a $663 million loss in the fourth quarter due to labor and supply chain issues. AT&T shares, on the other hand, rose about 2% after the telecommunications company reported earnings that topped analysts' expectations. Now, all eyes are on Tesla, which will report earnings after the close. Investors are increasingly worried about the possibility of a recession, as higher borrowing costs keep more companies from growing while slowing sales force some to lay off workers.

- US: U.S. 10-year Treasury yields, seen as a proxy for global borrowing costs, fell back to around 3.4%, near their highest level since September 2022, amid fears of a sharp economic downturn and a less aggressive Federal Reserve. The outlook intensifies the preference for government debt. Data on Tuesday showed U.S. business activity shrank for a seventh straight month in January, fueling fears that the economy could be headed for a recession. As a result, money markets are now pricing in more than a 98% chance that the U.S. central bank will raise rates by 25 basis points in February.

- AU: Australia's 10-year government bond yield was close to 3.5% in late January after the latest data showed the country's inflation rate in the final quarter of 2022 hit 7.8%, the highest since 1990. The heat map boosted expectations for a further 25 basis point hike in the central bank's cash rate to 3.35% in February, pushing borrowing costs to fresh 10-year highs. Before the CPI release, markets were pricing in a 40% chance of the RBA pausing the tightening cycle, but those hopes were dashed. The peak ratio rose above 3.6 percent from 3.4 percent before the report.

 

LEADING MARKET SECTORS:

- Strong sectors: Financials.

- Weak sectors: Information Technology, Consumer Discretionary, Utilities, Energy, Industrials, Materials, and Communication Services. 

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- USD: The U.S. dollar index held below 102 on Wednesday, 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. Weak U.S. economic data and mixed corporate earnings point to headwinds facing the broader economy. Easing U.S. inflation has also bolstered bets the Fed will slow the rate hikes further, with money markets now pricing in a more than 95 percent chance of a quarter-point hike at its next policy meeting. In addition, Fed President Christopher Waller said that the upcoming moves and projected decline in inflation brought policy close to "sufficient 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.

- AUD: The Australian dollar rose to $0.71, its highest level in more than five months, as the country's consumer inflation surged more than expected in the fourth quarter, supporting further tightening by the central bank. Annual inflation in Australia jumped 7.8% in the December quarter, the highest since 1990, and above market forecasts of 7.5%. The strong inflation data also outpaced wage growth, cementing expectations that the Reserve Bank of Australia will raise interest rates by 25 basis points in February. Some analysts have recently suggested that the central bank may pause its tightening. However, in 2022, the RBA raised the cash rate by 300 basis points for eight consecutive meetings, bringing borrowing costs to a 10-year high of 3.1%.

- NZD: The New Zealand dollar fell below $0.65, retreating from multi-month highs, as the country's consumer inflation held at a near 30-year high in the fourth quarter but fell short of the central bank's forecast, underpinning uncertainty over the coming months. Positive rate hike expectations. In the December quarter, annual inflation in New Zealand was 7.2%, above market expectations of 7.1% but below the Reserve Bank of New Zealand's forecast of 7.5%. As a result, markets now expect the Reserve Bank of New Zealand to cut rates to 50 basis points in February after raising rates by a record 75 basis points in November. Since October 2021, the central bank has increased the policy rate by 400 basis points for nine consecutive meetings, bringing the cash rate to a 14-year high of 4.25%.

- OIL: Brent crude futures regained ground above the $86 a barrel handle as investors weighed hopes for a recovery in demand in China's top importer against fears of a potential recession-driven demand slowdown in advanced economies. The EIA weekly report also showed that U.S. crude inventories rose by 0.533 million barrels last week, marking the fifth consecutive weekly increase, but slightly below market expectations of a 0.971 million barrel increase. On the supply side, OPEC will likely hold to its current production quotas when it meets next week, keeping markets tight and putting a lower bound on prices.

- WTI: WTI crude futures regained ground towards the $81 a barrel handle as investors weighed hopes for a recovery in demand in China's top importer against fears of a potential recession-driven demand drop in advanced economies. The EIA weekly report also showed that U.S. crude inventories rose by 0.533 million barrels last week, marking the fifth consecutive weekly increase, but slightly below market expectations of a 0.971 million barrel increase. On the supply side, OPEC will likely hold to its current production quotas when it meets next week, keeping markets tight and putting a lower bound on prices.

- PLD: Platinum futures were trading below $1.050 in late January, down from a ten-month high of $1099.75 recorded on Jan. 6, as investors fear slower economic growth in the US and Europe would weigh on the request. However, the platinum market is expected to benefit from supply constraints and China's reopening. Purchasing activity in the world's second-largest economy is set to recover, boosting industrial and automotive production. On the supply side, ongoing issues with severe weather, troubles with unions, and rising energy prices have led major platinum miners, including South Africa's Sibanye-Stillwater, to cut their lead to production. According to the World Platinum Investment Council, the market is expected to post a deficit of about 303,000 troy ounces in 2023, moving from a surplus in 2022.

- GAS: Gasoline futures fell to $2.64 a gallon from a more than 2-month high of nearly $2.7 hit earlier in the week, dragged on by worries about an economic slowdown in the US and following a report from the sector on another increase in domestic inventories. The weekly API report showed that U.S. gasoline inventories reached 0.62 million barrels last week, marking the ninth consecutive increase. On the supply side, OPEC will likely leave its current production quotas unchanged at its next meeting, keeping markets tight and putting a lower bound on prices.

- WET: Chicago wheat futures rose above $7.4 a bushel from a 15-month low of 7.2 hit on Jan. 24 as signs of improving macroeconomic sentiment from major commodity consumers offset the 'abundant world supply. The increase in demand was underscored by a resumption of US export inspections, which extended last week's increase by 3% to 334.2 thousand tons. However, strong supply limited the rebound in wheat. In addition, rainfall from the top Argentinian producer eased drought fears and added to solid crop 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.

 

CHART OF THE DAY:

The Canadian dollar changed hands around $1.34 as investors considered the Bank of Canada's latest monetary policy decision. In January, the People's Bank of China raised its overnight interest rate to 4.50%, the highest level since 2007, while announcing that it may end its aggressive tightening cycle. As a result, policymakers expect economic growth to stall in the first half of 2023 amid evidence that tight monetary policy has dampened domestic demand and weakened economic activity. Meanwhile, Canada’s annual inflation rate fell to 6.3% in December 2022, the lowest since February 2022, below market expectations of 6.4%. On the dollar front, weak U.S. economic data supported claims that the Federal Reserve will raise its rate modestly by 25 basis points in February to slow the pace of tightening.

 

 

- USDCAD - chart (D1), Resistance around ~ 1.345,  Support (target zone) around  ~ 1.30169.

 

 

 

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS: Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS) European stocks closed slightly lower on Wednesday, extending losses from the previous session, with the benchmark Stoxx 600 down 0.3% and Germany's DAX closing below 15,085. Technology stocks were the worst performers under pressure from Microsoft Corp. On the other hand, utilities and insurance companies rose. In addition, the airliner outperformed after EasyJet predicted it would beat current market expectations for 2023 and be profitable for the full year. Among other corporate headlines, the Financial Times reported that Apollo Global Management Inc. and former SoftBank Group Corp. executive Marcelo Claure were exploring buying Millicom Inc. International Cellular SA deal, which could value the company at close to $10 billion. ASML Holding NV reported better-than-expected profit and said the threat of export controls was growing. Sentiment in the Old Continent soured this week amid growth concerns and expectations that the European Central Bank will maintain its aggressive stance against inflation. The CAC 40 index was little changed, around 7040 on Wednesday, in line with regional peers, as investors weighed earnings reports on concerns about further tightening by major central banks. On the data front, the number of registered unemployed people in mainland France rose slightly by 26,000 to 2.817 million in December 2022 from an 11-year low last month. In corporate headlines, train maker Alstom reported an 8% rise in third-quarter sales to 5.15 billion euros, while Airbus Helicopters reported lower orders for fiscal 2022 but deliveries. also increased. Meanwhile, BNP Paribas has announced that it will enter a new phase to accelerate its energy transition financing activities significantly. The group plans to provide 40 billion euros in outstanding financing for producing low-carbon, mainly renewable energy, by 2030. The FTSE MIB closed flat on Wednesday at 25,875, maintaining gains from the previous three sessions, as gains in banks and technology stocks offset losses in energy and industrials. Business guidance in Europe and the U.S. weighed on overall sentiment as central banks continued to signal a hawkish outlook. On the other hand, business conditions in Germany and investor sentiment in Switzerland improved in January, while producer inflation in the UK and Spain eased to multi-month lows in December and downplayed recession risks. Interpump Group fell 3 percent to lead the decline in industrials, while Diasorin and Amplifon were down nearly 1 percent each, dragging down the healthcare sector, despite Jeffries upgrading the latter. On the other hand, banks posted gains despite a drop in Italian bond prices, extending yesterday's gains. Elsewhere, Iveco rose 3 percent after it announced it would supply Belgium with 500 electric buses by 2026.   The Baltic Dry index, which measures the cost of shipping cargo worldwide, tumbled for the seventh consecutive session to around 703 points, its lowest level in two-and-a-half years, driven by weak demand for capsized vessels. The capesize index, which tracks iron ore and coal cargoes of 150,000 tonnes, fell 631 points, its lowest since June 2020. The supramax index dropped 1 point to 648. London stocks remained under pressure on Wednesday, with the blue-chip FTSE 100 closing below 7,750, weighed down by economically sensitive sectors such as industrials and consumer discretionary. The index has been struggling after a recent rally as investors grew increasingly concerned about Britain's bleak economic outlook. Regarding individual share price movements, online retailer Ocado was one of the biggest losers, down almost 5%. On the other hand, Aviva shares rose about 3% after the insurer maintained its dividend guidance and outlook for capital returns. The ruble-based MOEX Russia index closed at 2,170 on Wednesday, extending losses for a second session under pressure from energy producers and banks as Russia's economic isolation continued to hurt growth prospects. Financial firms halted a three-day rally to lose an average of 0.5 percent. Still, the sector is up 6% this year, thanks to solid year-end results from Sberbank and the addition of several Chinese and Hong Kong securities on the Saint-Petersburgh Exchange. Energy companies also posted losses, extending year-to-date to more than 3 percent due to deep discounts on Urals oil. In addition to the recent EU oil embargo and G7 price caps on seaborne crude exports, the group will extend restrictions to seaborne exports of diesel, jet fuel, and other refined products on Feb. 5. On the other hand, shares of mining company Polymetal surged 4% after reporting strong fourth-quarter results. Canada's main stock index fell nearly 1% to close below 20,500 on Wednesday, tracking Wall Street's decline as weak earnings highlighted the impact of rising borrowing costs on corporate results. Meanwhile, investors digested the central bank's latest monetary policy decision. The People's Bank of China raised borrowing costs by 25 basis points and signaled that the tightening cycle would end as expected if the economy develops broadly in line with the outlook. Industrials and energy were the worst-performing sectors, while technology outperformed. The Dow fell nearly 300 points on Wednesday, while the S&P 500 and Nasdaq 100 fell 1.2 percent and 1.9 percent, respectively, as disappointing earnings added to fears of a possible recession. Shares of Microsoft (MSFT), the second-largest U.S. company by value, fell more than 3% as the tech bellwether posted its slowest sales growth in more than six years. Boeing fell about 3% after the plane maker missed profit and revenue estimates. AT&T, on the other hand, rose nearly 4% after earnings beat analysts' expectations. All eyes now turn to Tesla and IBM, which will report earnings after the close. Investors are increasingly worried about the possibility of a recession, as higher borrowing costs keep more companies from growing while slowing sales force some to lay off workers. The Japan Nikkei 225 gained 0.35% to close at 27,395 on Wednesday. In comparison, the broader Topix gained 0.39% to close at 1,981 on Wednesday, extending a fourth straight session of gains as the Bank of Japan weighed on surging inflation. Under huge market pressure, it is still committed to an ultra-low interest rate policy. Meanwhile, analysts warned that Japanese stocks could come under pressure as the market widened while global economic uncertainty continued to weigh on sentiment. Index heavyweights such as Nippon Steel (4.5%), Keyence (1.7%), Nippon Yusen (2.1%), Kawasaki Kimori (3.6%), and Daikin Industries (1.1%) rose sharply. In corporate news, Nidec Corp fell 5.4% after slashing its full-year operating profit forecast by almost half on weaker demand and a slower-than-expected recovery in the global auto industry. On Wednesday, the New Zealand ANZ 50 index rose 66.80 points, or 0.56%, to close at 11999.72 points, the highest closing point since early April 2022, ending Labor leader Chris Hipkins's (Chris Hipkins) surprise last week. The fall came two days after he resigned and was sworn in as New Zealand's 41st prime minister. According to reports, Hipkins will hold his first cabinet meeting later today and vowed to focus on the economy, especially inflation. Meanwhile, the latest figures show New Zealand's annual inflation rate was unchanged at 7.2% in the final quarter of 2022, staying near its highest level in more than 30 years. U.S. stocks struggled on Tuesday, with markets in China and Hong Kong closed for the Lunar New Year holiday. Health services, financials, consumer durables, and utilities led gains, with Ryman Healthcare (4.1%), Meridian Energy (2%), Kiwi Property Group (1.6%), Port of Tauranga (1%), and Ebos Group Ltd (0.8%) ) rose strongly. The Australia S&P/ASX 200 rose 0.2% to above 7,500 on Wednesday, reaching its highest level in nine months, helped by gains in financial and gold stocks. Investors are also looking ahead to Australian consumer price data due later in the day, which is expected to show that inflation has peaked in the fourth quarter, supporting the case for a slower pace of rate hikes or even a pause. Gold stocks led the market higher, with industry leaders Newcrest Mining and Northern Star Resources up 1.9 percent and 1 percent, respectively. Financial heavyweights also gained, including Commonwealth Bank (0.7 percent), ANZ Banking Group (0.8 percent), Westpac (0.4 percent), NAB (0.4 percent), and Macquarie Group (1 percent). Meanwhile, on Wednesday, iron ore miners, energy companies, and lithium stocks were mostly lower. The India BSE Sensex fell 770 points in early trade to 60,205 on Wednesday, its worst session in more than a month, weighed down by Adani Group shares, as investors continued to assess expectations ahead of next week's EU budget. Stocks fell after US short-seller Hindenburg reported that companies controlled by the Adani Group had significant debt problems, although not directly into the Sensex, as losses in multiple sectors of the benchmark index were felt. State Bank of India and IndusInd Bank fell more than 4% each on the index. On the other hand, automakers continued to outperform, supported by Maruti Suzuki's strong earnings report yesterday. BSEC will be closed on Thursday due to a local holiday. South African equities extend losses for the second session. The JSE FTSE All Share Index closed down 0.3% at 73,711 on Wednesday, extending a 0.1% loss in the previous session. On Thursday, investors cautiously awaited the South African Reserve Bank's monetary policy decision. The central bank is widely expected to deliver a 50 basis point rate hike, following a 75 basis point hike in November. This would take borrowing costs to 7.5%, the highest since June 2015. Among sectors, healthcare stocks fell more than 2%, followed by technology stocks (-1.4%). Conversely, basic materials gained 0.8%, and energy shares rose 0.3%. Brazil's Ibovespa stock index erased early gains. It climbed 0.5% to 111,653 on Wednesday, the most in more than two months, with support from banks and retailers as investors watched economic data and speeches of President Lula at the summit in Uruguay. Shares of retail giant Americanas soared 20% after sharing a list of more than 8,000 creditors to back BRL 41 billion debt from its recent accounting scandal. However, its shares remain below BRL 1, up from BRL 12 two weeks ago. Meanwhile, shares of Banco do Brasil jumped 2.4%, bringing gains for the financial sector. On the data front, the FGV Consumer Confidence Survey showed a deterioration in consumer expectations for the coming months.   REVIEWING THE LAST ECONOMIC DATA: Reviewing the latest economic  news, the most important data is: - TR: Turkey's manufacturing confidence index rose for the first time in three months, reaching 101.7 in January 2023, the highest since August 2022, from December's 30-month low of 97.8. The latest reading reflects an improvement in expectations in the next three months regarding production (111.4 vs. 102.7 in December) and the export order book (111.9 vs. 100). At the same time, the indicator for both fixed investment spending (116.5 from 115.5) and general business sentiment (91.2 vs. 87.6) strengthened. Conversely, expectations of total employment worsen (106.0 vs. 106.4). - RU: Russian producer prices fell by 3.3% year-on-year in December 2022, following a 1.9% drop in the previous month. It was the most significant drop since June 2020, as the Russian economy shrank sharply and energy supplies rose due to falling foreign demand. Miner costs fell faster (-15.3% vs. -12.3%), and manufacturing costs fell (-0.9% vs. 0.6%). On the other hand, water suppliers (10.2% vs. 4.9%) and electricity, gas, steam, and air conditioning suppliers (6.9% vs. 5.1%) saw further price increases. On a monthly basis, the producer price index f fell 0.8%, extending the 0.4% drop in November. - US: The latest report from the U.S. Energy Information Administration showed that U.S. crude oil inventories rose by 533,000 barrels in the week ended January 20, slightly below market expectations of 97.1 million barrels. Meanwhile, crude inventories at the Cushing, Oklahoma, delivery hub rose by 4.267 million barrels, the most since April 2020, after rising by 3.646 million barrels in the previous week. Also, gasoline inventories rose by 1.763 million barrels, compared to forecasts for a build of 1.767 million barrels. On the other hand, distillate inventories, which include diesel and heating oil, fell 507,000, below expectations for a 1.121 million draw. - CA: As expected, the Bank of Canada raised its overnight rate target by 25 basis points to 4.5% at its first meeting in 2023 and signaled that its aggressive tightening cycle would end if the economy developed broadly in line with the central bank's outlook. The Bank added that it would also continue to implement quantitative tightening to complement the restrictive stance of the policy rate. Policymakers stressed that households continued to feel pressure from rising inflation as food and housing prices accelerated further. However, lower gasoline prices pushed inflation down to 6.3 percent in December from a peak of 8.1 percent in June. Still, short-term inflation expectations are rising but are expected to fall sharply later this year. Meanwhile, the bank estimates that the Canadian economy will grow by 3.6% in 2022 but may stall in the middle of the year before growth picks up again in the year's second half. - EU: Electricity prices in Germany, which are close to the €200/MWh level, fell below €10 in mid-January due to increased demand and reduced wind capacity. Meanwhile, Germany plans to spend 14.5 billion euros to fund its electricity tariff caps by May. In addition, Germany announced a cap on household electricity prices of 40 cents per kWh, or 80% of actual consumption. Still, prices remain well below the December peak of €450/MWh, while natural gas prices have fallen sharply, and electricity consumption has fallen due to high energy prices and warmer-than-usual temperatures. - UK: Hot weather in Britain and Europe in recent months has dampened demand and eased pressure on the country's energy system, with electricity prices in the UK falling below 150 pounds per megawatt-hour, close to their highest level since September 2021. The UK's ample energy supply and falling gas prices have also been key drivers of lower electricity prices. Meanwhile, households and businesses have been cutting energy after National Grid warned in October of supply shortages during the harsh winter. Usage amount. On the policy front, the UK has committed around £60bn in energy bill aid to households and businesses until April 2023. - UK: In December 2022, the ex-factory price of goods produced by UK manufacturers rose 14.7% year-on-year, down from 16.2% in November. That marked the lowest producer inflation since March and eased for the fifth straight month. However, four of the 10 product categories dragged down the growth rate, with a decline in petroleum equipment contributing the most at negative 3.12 percentage points. As a result, on a monthly basis, producer prices for output fell 0.8% in December, the most significant drop since April 2020, after falling 0.1% in November, missing market forecasts of 0.3%. - FR: The number of people registered as unemployed in mainland France rose slightly by 26,000 to 2.817 million in December 2022 from an 11-year low in the previous month. The increase was due to a 76,000 increase in the number of unemployed young people under 25. Unemployment, on the other hand, fell by 11,000 to 1.64 million for people aged 25 to 49 and by 300,000 to 803,200 for those 50 or older. Compared to the previous year's month, 260,000 fewer people were registered as unemployed. - GE: Germany's Ifo business climate indicator rose 1.6 points from the previous month to 90.2 in January 2023, the fourth consecutive monthly increase and the highest since last June. Europe's largest economy started the year with cautious optimism amid easing inflation and an improving outlook as pressure on supply chains eased. As a result, expectations for the coming months were significantly less pessimistic (86.4 versus 83.2 in December), while businesses' assessments of their current conditions were slightly more negative (94.1 versus 94.4). By industry, manufacturers (-0.7 vs. -5.7), service providers (0.2 vs. -1.2), traders (-15.4 vs. -20.0), Ifo expects a slight contraction in the first quarter, mainly due to consumption decline, but a recession may be avoided. - SW: In December 2022, Sweden's annual producer inflation rate fell to 18.7% from 19.5% in the previous month. Prices of energy-related products (45.1% vs. 50.5% in November), consumer goods (14.8% vs. 16.4%), and capital goods (12.8% vs. 11.9%) rose at a slower pace. Excluding energy-related products, producer prices rose 11.4%. On a monthly basis, producer prices edged up 2.1 percent in December after rising 2.0 percent in November. - AU: As of December 2022, Australia's monthly consumer price index (CPI) index has accelerated from 7.3% in November to a new peak of 8.4%, exceeding the market consensus of 7.6%. Upward pressure came primarily from housing costs (10.1% vs. 9.6% in November), with new dwellings surging 16.0%; food and non-alcoholic beverages (9.5% vs. 9.4%), with costs rising across all subcategories; transportation (7.3% vs. 9.0%), driven by motor fuel; (10.8% vs. 8.4%); and entertainment and culture (14.4% vs. 5.8%), boosted by record holiday travel and lodging prices (29.3%). The monthly CPI index, which excludes volatile items such as fruits, vegetables, and fuels, increased to 8.1 percent in December, the highest since December 2018, from 6.7 percent in November. Inflation remains well above the Reserve Bank of Australia's 2-3% target range. - AU: In December 2022, Australia's Westpac Melbourne Institute Leading Economic Index (Westpac Melbourne Institute Leading Economic Index) fell slightly by 0.1%, the same decline as the previous month. Meanwhile, the index's six-month annualized growth rate was -0.97% in December, essentially unchanged from November's figure and marking the fifth consecutive month of negative growth. "The main driver of the slowdown will be consumers as rising interest rates and negative real wage growth weigh on spending," Westpac chief economist Bill Evans said. "However, there is unusual uncertainty about this outlook, particularly in the household sector, where the large surplus of savings accumulated during the pandemic has provided a buffer against rising interest rates and cost-of-living pressures, especially for households in higher income groups .” - 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. Prices rose faster in 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%). 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%. - BH: The annual inflation rate in Bosnia and Herzegovina fell to 14.8% in December 2022, down from 16.3% in November and reaching its lowest levels in 7 months. Prices increased at a slower pace for food and soft drinks (23.2% vs. 24.5% the previous month), housing and utilities (16.9% vs. 19.1%), transport (17. 2% vs. 23.8%) and communications (1.4% vs. 23.8%). % versus 1.5%), while down for clothing and footwear (-7.3% vs. -7.1%). Conversely, costs grew fastest for recreation and culture (11.6% vs. 11.5%), restaurants and hotels (11.1% vs. 11%), and other goods and services (8.6% vs. 8,1%). On a monthly basis, consumer prices fell 0.6% after rising 0.2% in November. - GE: Germany's Ifo Business Climate indicator rose 1.6 points from the previous month to 90.2 in January 2023, the fourth consecutive increase and the highest level since June last year. Europe's largest economy started the year with cautious optimism as inflation eased and the outlook improved as tensions over supply chains eased. As a result, expectations for the coming months are significantly less pessimistic (86.4 vs. 83.2 in December), while companies' assessments of their current situation have become slightly more negative (94.1 vs. 94.4). By sector, sentiment improved among manufacturers (-0.7 vs. -5.7), service providers (0.2 vs. -1.2), traders (-15.4 vs. -20.0) and manufacturers (-21.6 vs. -21.9). Nevertheless, the Ifo expects a slight contraction in the first quarter, mainly due to a decline in consumption. - LT: Industrial production in Lithuania fell by 7.7 percent in December 2022 after showing no growth in the previous month's revised figure and marking the most significant drop since May 2020. (percent) and water supply, sewage, and waste management (-2.8 percent). On the other hand, the production of electricity, gas, steam, and air conditioning increased (10.1 percent). Considering the full year, industrial production increased by 9.5% over the previous year. On a seasonally adjusted monthly basis, industrial production decreased by 4% from the revised growth of 0.4% in November. - SW: Annual producer price inflation in Sweden slowed to 18.7% in December 2022 from 19.5% the previous month. Prices increased at lower rates for energy products (45.1% against 50.5% in November), consumer goods (14.8% against 16.4%), and capital goods (12.8% against 11.9%). Excluding energy-related products, producer prices increased by 11.4%. On a month-to-month basis, producer prices rose 2.1% in December, following a 2.0% increase in November.   LOOKING AHEAD: Today, investors should watch out for the following important data: - USD: Advance GDP q/q, Advance GDP Price Index q/q, Core Durable Goods Orders m/m, Durable Goods Orders m/m, Unemployment Claims, Goods Trade Balance, Prelim Wholesale Inventories m/m, New Home Sales, and Natural Gas Storage. - EUR: Spanish Unemployment Rate. - GBP: CBI Realized Sales. - JPY: BOJ Summary of Opinions, and SPPI y/y. - CNY: Bank Holiday.   KEY EQUITY & BOND MARKET DRIVERS: Кey factors in the stock and bond market are currently: - CA: The Canadian 10-year government bond yield fell below 2.8%, near a five-month low of 2.72% hit on Jan. 18, after the Bank of Canada announced the end of its tightening policy. The bank raised its key interest rate by 25 basis points in its January policy decision. It said it would keep borrowing costs unchanged to assess the impact of cumulative rate hikes on the Canadian economy. The move follows 425 basis points of rate hikes since March 2022 to curb inflation, which peaked at 8.1% in June after lower fuel prices and monetary tightening slowed full-year price growth to 6.3% in December. %. Meanwhile, Bank of Canada policymakers expect the Canadian economy to stagnate in early 2023 before picking up again towards the end of the year, with a growth of 1% in 2023 and 2% in 2024. - US: Stock futures contracts tied to the blue-chip Dow fell 0.7% on Wednesday, while those tied to the S&P 500 and Nasdaq fell 0.8% and 1.1%, respectively, as investors monitored a flurry of corporate earnings data. Microsoft fell more than 2 percent in premarket trading after the software giant posted its slowest sales growth in more than six years. Boeing fell about 2 percent after recording a $663 million loss in the fourth quarter due to labor and supply chain issues. AT&T shares, on the other hand, rose about 2% after the telecommunications company reported earnings that topped analysts' expectations. Now, all eyes are on Tesla, which will report earnings after the close. Investors are increasingly worried about the possibility of a recession, as higher borrowing costs keep more companies from growing while slowing sales force some to lay off workers. - US: U.S. 10-year Treasury yields, seen as a proxy for global borrowing costs, fell back to around 3.4%, near their highest level since September 2022, amid fears of a sharp economic downturn and a less aggressive Federal Reserve. The outlook intensifies the preference for government debt. Data on Tuesday showed U.S. business activity shrank for a seventh straight month in January, fueling fears that the economy could be headed for a recession. As a result, money markets are now pricing in more than a 98% chance that the U.S. central bank will raise rates by 25 basis points in February. - AU: Australia's 10-year government bond yield was close to 3.5% in late January after the latest data showed the country's inflation rate in the final quarter of 2022 hit 7.8%, the highest since 1990. The heat map boosted expectations for a further 25 basis point hike in the central bank's cash rate to 3.35% in February, pushing borrowing costs to fresh 10-year highs. Before the CPI release, markets were pricing in a 40% chance of the RBA pausing the tightening cycle, but those hopes were dashed. The peak ratio rose above 3.6 percent from 3.4 percent before the report.   LEADING MARKET SECTORS: - Strong sectors: Financials. - Weak sectors: Information Technology, Consumer Discretionary, Utilities, Energy, Industrials, Materials, and Communication Services.    TOP CURRENCY & COMMODITIES MARKET DRIVERS:  Кey factors in the currency and commodities market are currently: - USD: The U.S. dollar index held below 102 on Wednesday, 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. Weak U.S. economic data and mixed corporate earnings point to headwinds facing the broader economy. Easing U.S. inflation has also bolstered bets the Fed will slow the rate hikes further, with money markets now pricing in a more than 95 percent chance of a quarter-point hike at its next policy meeting. In addition, Fed President Christopher Waller said that the upcoming moves and projected decline in inflation brought policy close to "sufficient 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. - AUD: The Australian dollar rose to $0.71, its highest level in more than five months, as the country's consumer inflation surged more than expected in the fourth quarter, supporting further tightening by the central bank. Annual inflation in Australia jumped 7.8% in the December quarter, the highest since 1990, and above market forecasts of 7.5%. The strong inflation data also outpaced wage growth, cementing expectations that the Reserve Bank of Australia will raise interest rates by 25 basis points in February. Some analysts have recently suggested that the central bank may pause its tightening. However, in 2022, the RBA raised the cash rate by 300 basis points for eight consecutive meetings, bringing borrowing costs to a 10-year high of 3.1%. - NZD: The New Zealand dollar fell below $0.65, retreating from multi-month highs, as the country's consumer inflation held at a near 30-year high in the fourth quarter but fell short of the central bank's forecast, underpinning uncertainty over the coming months. Positive rate hike expectations. In the December quarter, annual inflation in New Zealand was 7.2%, above market expectations of 7.1% but below the Reserve Bank of New Zealand's forecast of 7.5%. As a result, markets now expect the Reserve Bank of New Zealand to cut rates to 50 basis points in February after raising rates by a record 75 basis points in November. Since October 2021, the central bank has increased the policy rate by 400 basis points for nine consecutive meetings, bringing the cash rate to a 14-year high of 4.25%. - OIL: Brent crude futures regained ground above the $86 a barrel handle as investors weighed hopes for a recovery in demand in China's top importer against fears of a potential recession-driven demand slowdown in advanced economies. The EIA weekly report also showed that U.S. crude inventories rose by 0.533 million barrels last week, marking the fifth consecutive weekly increase, but slightly below market expectations of a 0.971 million barrel increase. On the supply side, OPEC will likely hold to its current production quotas when it meets next week, keeping markets tight and putting a lower bound on prices. - WTI: WTI crude futures regained ground towards the $81 a barrel handle as investors weighed hopes for a recovery in demand in China's top importer against fears of a potential recession-driven demand drop in advanced economies. The EIA weekly report also showed that U.S. crude inventories rose by 0.533 million barrels last week, marking the fifth consecutive weekly increase, but slightly below market expectations of a 0.971 million barrel increase. On the supply side, OPEC will likely hold to its current production quotas when it meets next week, keeping markets tight and putting a lower bound on prices. - PLD: Platinum futures were trading below $1.050 in late January, down from a ten-month high of $1099.75 recorded on Jan. 6, as investors fear slower economic growth in the US and Europe would weigh on the request. However, the platinum market is expected to benefit from supply constraints and China's reopening. Purchasing activity in the world's second-largest economy is set to recover, boosting industrial and automotive production. On the supply side, ongoing issues with severe weather, troubles with unions, and rising energy prices have led major platinum miners, including South Africa's Sibanye-Stillwater, to cut their lead to production. According to the World Platinum Investment Council, the market is expected to post a deficit of about 303,000 troy ounces in 2023, moving from a surplus in 2022. - GAS: Gasoline futures fell to $2.64 a gallon from a more than 2-month high of nearly $2.7 hit earlier in the week, dragged on by worries about an economic slowdown in the US and following a report from the sector on another increase in domestic inventories. The weekly API report showed that U.S. gasoline inventories reached 0.62 million barrels last week, marking the ninth consecutive increase. On the supply side, OPEC will likely leave its current production quotas unchanged at its next meeting, keeping markets tight and putting a lower bound on prices. - WET: Chicago wheat futures rose above $7.4 a bushel from a 15-month low of 7.2 hit on Jan. 24 as signs of improving macroeconomic sentiment from major commodity consumers offset the 'abundant world supply. The increase in demand was underscored by a resumption of US export inspections, which extended last week's increase by 3% to 334.2 thousand tons. However, strong supply limited the rebound in wheat. In addition, rainfall from the top Argentinian producer eased drought fears and added to solid crop 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.   CHART OF THE DAY: The Canadian dollar changed hands around $1.34 as investors considered the Bank of Canada's latest monetary policy decision. In January, the People's Bank of China raised its overnight interest rate to 4.50%, the highest level since 2007, while announcing that it may end its aggressive tightening cycle. As a result, policymakers expect economic growth to stall in the first half of 2023 amid evidence that tight monetary policy has dampened domestic demand and weakened economic activity. Meanwhile, Canada’s annual inflation rate fell to 6.3% in December 2022, the lowest since February 2022, below market expectations of 6.4%. On the dollar front, weak U.S. economic data supported claims that the Federal Reserve will raise its rate modestly by 25 basis points in February to slow the pace of tightening.     - USDCAD - chart (D1), Resistance around ~ 1.345,  Support (target zone) around  ~ 1.30169.