Disappointing US data driving global markets downswing

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Disappointing US data driving global markets downswing

Disappointing US data driving global markets downswing: Negative trading in the markets, while everyone looks forward to Fed decisions on raising interest rates. 

Evest follows market developments in the following report.


US industrial production declines 0.1% in December

Oil rises 4% in a week

Negative dynamics in global indices at the end of the week

Gold struggles to stabilize after declining immediately as the retail sales report is released



US industrial production declines 0.1% in December

The Federal Reserve Board said that US industrial production fell by 0.1% in December from the previous month.

The decline surprised analysts, who predicted an average growth of 0.3%, according to Trading Economics.

US Department of Commerce data, also released Friday, showed retail sales in the country fell by 1.9% in December from the previous month.

Experts did not expect the index to change. Retail sales rose by 0.2% in November, up from 0.3% previously reported, according to revised data.

Banks’ securities and high-tech companies are under pressure because of sanctions threats and continued sales in the US high-tech sector. 

The weekend on Wall Street lasts for 3 days – the American market will close on Monday because of the celebration of Martin Luther King Day.

In China, the beginning of the week will be full of aggregate statistics – on the labor market, industrial production and GDP for the fourth quarter (GDP growth is expected at 3.6%). 

European markets focus on inflation data.

On Wednesday, data will be released for both the European Union as a whole and local data from the United Kingdom and Germany. 

Oil rises 4% in a week

Oil prices rose on Friday, ending for the fourth week in a row, with indications that global demand remains strong despite the spread of the new strain of Covid-19, Omicron.

March Brent crude futures prices on the London Stock Exchange ICE Futures rose by $0.92 to $85.25 per barrel on Friday.

West Texas Intermediate crude futures’ price for February in electronic trading on the New York Mercantile Exchange (NEMX) rose by 0.97% to $82.92.

Since the beginning of last week, Brent and West Texas Intermediate have risen by about 4%.

Concern about the emergence of a new strain of coronavirus led to a sharp decline in oil prices in November and December,
but since then the market has fully recovered, as the increase in infections has not led to new closures and declines in economic activity.

Media reports that China is preparing to release oil from strategic reserves may be among the pressures facing the market on Friday.

According to Reuters, this could happen before the Lunar New Year holidays, which will begin this year on February 1.

In global markets, the main concern for investors remains the aggressive response of regulators to the continued rise in inflation.

The Vice President of the European Central Bank, Louis de Gwendos, said that the rise in inflation in the eurozone was not temporary as previously thought.

According to experts, Brent crude rose above $85 per barrel.

We can say that information about China’s willingness to sell part of its strategic reserves over the New Year’s holiday has somewhat increased prices.

This confirms once again that there is a material shortage of market supplies.



Negative dynamics in global indices at the end of the week

On Friday, negative dynamics for Asian stock indices prevailed.

Japan’s Nikkei index declined sharply by 1.3%, China’s Shanghai Composite Index – 1%,
Hong Kong’s Hang Seng by 0.2%. Even in Europe, FTSE, DAX, and CAC 40 declined by 0.2-0.9%,
a situation that was not very different in the USA with a loss of 0.2-0.8%.

In the United States on Friday, the largest banks’ reports were released for the fourth quarter,
which turned out to be better than expected.

JPMorgan, the largest US bank in terms of assets, cut its net income by 14%, but the result exceeded expectations. 

Wells Fargo, one of the largest US banks, increased its net profit by 86% and revenue by 12.8%,
while the figures also exceeded analysts’ expectations.

Citigroup, one of the three largest U.S. banks, cut its net income despite a modest increase in revenue,
both of which exceeded market expectations.

According to the U.S. Department of Commerce, retail sales in the country declined in December by 1.9% from the previous month.

Analysts had expected an average decline of just 0.1%, according to Bloomberg.

Participants in Trading Economics did not expect the indicator to change.

The University of Michigan consumer confidence index fell to 68.8 in January from 70.6 the previous month.

This is practically the lowest level in the last decade: The index was lower in November last year only (67.4 points).

Analysts predicted, on average, that the index would fall to just 70 points,
according to a survey by Trading Economics and the Wall Street Journal.



Gold struggles to stabilize after declining immediately as the retail sales report is released

Gold price struggles to stabilize after its quick reaction to the poor US retail sales report,
and precious metal may be traded within the scope of the monthly opening,
before the Fed’s next interest rate decision on January 26 as central bank officials try to avoid risk.

According to CME Fed Watch Table, Federal Reserve fund futures currently set ,
a more than 80% probability of raising the interest rate by 25 basis points in March,
and the Federal Open Market Commission may use the next interest rate decision to unveil a more detailed exit strategy,
as Governor Lil Brainard says: “We started to discuss reducing our balance sheet.”

This is while testifying before the Senate Committee on Banking, Housing, and Urban Affairs.