Weekly markets TL;DR: Massive week ahead for stocks, crypto and forex

on Jan 31, 2023
  • Watershed week for economy as Fed meeting Wednesday should give colour for interest rate policy going forward
  • UK and eurozone policy also to be revealed, as volatility in markets should be expected
  • Earnings season in full flow, with Meta and Alphabet among 20% of S&P 500 reporting earnings this week

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1. Economy

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  • Eurozone growth grew 0.1%, unexpected compared to expectations of a 0.1% contraction
  • IMF stated UK the only leading economy likely to head into recession in 2023
  • These are positive data points but could affect the all-important Federal Reserve meeting in the US tomorrow
  • Wednesday also brings the first jobs report of 2023, the job openings number for December from the Labor Department.
  • 25bps hike seems a certainty, but all ears will be trained to Jerome Powell’s speech regarding the path for remainder of 2023

2. Stock Market

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  • S&P 500 is heading for its best January since 2019 despite pullback Monday
  • Busiest week of earnings to come, with 20% of the index reporting this week
  • Mcdonalds and General Motors are today, with tech giants Apple, Meta and Alphabet particularly key later in the week
  • Markets should see volatility tomorrow depending on severity of Powell’s speech regarding interest rate policy going forward

3. Crypto

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  • Crypto has been muted again this week, Bitcoin still holding around $23K
  • Such is the sector’s correlation with interest rates, Wednesday represents the biggest day for crypto so far this year
  • Big moves could well be in play, with a firmly hawkish tone from the Fed having the potential to nuke Bitcoin’s recent gains. The flipside is also true, with the rally bound to kick on if Powell strikes a softer tone than market anticipates 
  • Not much news beyond that in crypto, with Bitcoin set for its best January since 2013 unless the Fed spoils things tomorrow

4. Other assets

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  • Gold continues to trade strongly, at all-time highs in many foreign currencies
  • Fed meeting Wednesday should influence its hopes of pushing towards the psychologically important $2,000 level
  • Real estate in the UK is wobbling, with home loan approvals dropping to 35,600, well below expectations 45,200 and the lowest since the depths of lockdown in May 2020
  • Forex markets have been relatively calm this past week, as traders ready themselves for the upcoming storm ahead of crucial rate announcements in the US (Wednesday), UK (Thursday) and eurozone (Thursday)

5. What to look out for

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  • Between earnings season kicking into full gear, the Fed meeting Wednesday, employment numbers Friday, and ECB and Bank of England also meeting, this week is the most pivotal across markets in quite some time
  • Watershed moment for the economy as it represents the first Fed meeting in some time where there are realistic hopes for a tangible change in long-term plan
  • Could be particularly extreme moves in tech sector and crypto, with the big names of the former reporting earnings and crypto moving so hand-in-hand with interest rate expectations, but all sectors should see heightened moves

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