Financial Markets Daily Report

Search

Investors traded cautiously on Wednesday, on the back of mixed results from the Q4 corporate earnings season and with the focus still on expectations about higher interest rates across financial markets.

On Tuesday investors traded with a risk-off mood as they took position ahead of the release of key reports for the Q4 earning season this week and the first monetary policy meeting by the Fed on 25-26 January.

Financial markets recorded a positive start of the week, supported by the better-than-expected Q4 GDP print in China (4% y/y) and positive expectations for the corporate earnings season later this week.

Investors traded cautiously in the last session of the week, still digesting the more hawkish shift by the major central banks and with a weaker-than-expected start of the Q4 earning seasons for US banks. Monthly data also showed a decline in retail sales (-1.9% m/m) and industrial production (-0.1% m/m) in the US in December.

In yesterday's session, the economic impact of the omicron variant together with investors' expectation for central banks were the main drivers in financial markets.

Investors traded cautiously on Wednesday, digesting the December inflation print in the US, which showed headline inflation rising to 7.0%, highest since June 1982, and core inflation increasing by 0.6 pp to 5.5% yoy. Even if in line with consensus expectations, these figures add pressure to the Fed to start hiking interest rates as soon as in March.

In yesterday's session, investors traded with a risk on mood and, in stock markets, took advantage of recent declines to “buy the dip”, particularly in the US technology sector.

In yesterday's session investors traded cautiously amid expectations of a faster monetary policy tightening from the Fed. Implicit interest rates are discounting the first rate hike in the spring, earlier than previously expected. The inflation report to be released this Wednesday and the speech by the Fed head Powell in Congress today will be key.

In the last session of the week, investors continued to digest the hawkish messages of the minutes of the last Federal Reserve meeting as well as relevant economic data releases. In the US, non-farm payrolls increased in December by 199k (consensus expected +400k) and the unemployment rate declined by 0.3 pp to 3.9%.

During a volatile session, financial markets ended the day with further losses, as investors digested the more hawkish tone in the minutes of the December Fed meeting, which hinted at the possibility that policy interest rates could be raised “sooner or at a faster pace” than officials had initially anticipated.

Financial markets extended gains on Tuesday as investors continued to bet that the ongoing economic recovery could sustain the spike in COVID infections across the world.

Investors traded with a risk-on mode during the first session of the year, extending recent gains while shrugging off a further deterioration in the number of COVID daily infections across the world.