Equities are seen cautious ahead of a busy week

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

US equities closed out last week on a positive note, as investors weighed another heavy batch of earnings economic data ahead of this week’s Federal Reserve meeting.  News on the economic front was upbeat, as personal income rose, pending home sales posted a gain for last month, and consumer sentiment was positively revised.  On the corporate side, American Express soared 10.5% and Visa gained almost 3%, while Intel plunged 6.4%.  Meantime, Tesla soared 11% and marked a 31% weekly gain on its firm quarterly reports.  For the week, the Dow added 1.6% and the S&P 500 was up almost 2% while Nasdaq 100 gained 3.3%.  European markets finished out the week with gains, with the Euro Stoxx 50 advancing 0.1% for the day and 1.2% for the week. 

Summary as at 30.01.2023 

• Asian shares started cautiously on Monday with the exception of Chinese equities which jumped as mainland markets returned from the week-long Lunar New Year holidays.  Other regional benchmarks declined ahead of a pivotal Fed decision later this week and on global economic uncertainties. 

• European equities are headed for a tepid start as US equity futures are also falling ahead of a busy week for earnings and a widely expected Fed meeting. 
• Oil prices were lower in early trading on Monday as traders weighed hopes for a demand recovery in Chia and growing tensions in the Middle East against fears of a global economic slowdown and the resilience of Russian supply.  Chinese authorities said over the weekend that they would promote consumption recovery as a major economic driver and boost imports, sparking demand optimism. 
• Personal income in the US rose 0.2% mom in December, matching the consensus forecast, while November’s figure was downwardly revised to a 0.3% rise. Personal spending declined 0.2%, also matching the Street’s expectation, and compared to the prior month’s downwardly adjusted 0.1% decrease. The December savings rate as a percentage of disposable income was 3.4%, up from November’s positively revised 2.9% rate. 
• Also in the US, the PCE Deflator rose 0.1% mom, above expectations for a flat reading, and compared to November’s unadjusted 0.1% gain. Compared to last year, the deflator was 5.0% higher, matching estimates, and compared to the prior month’s unadjusted 5.5% rise. Excluding food and energy, the PCE Core Price Index rose 0.3% mom, matching the forecast, compared to November’s unrevised 0.2% rise. The index was 4.4% higher yoy, in line with estimates, and after November’s unadjusted 4.7% rise. 
• The final University of Michigan Consumer Sentiment Index for January was unexpectedly revised higher to 64.9, from the preliminary 64.6 figure, where it was expected to remain. The upward revision came as a modest downward adjustment to the current conditions portion of the index was more than offset by an upward revision to the expectation component of the survey. The 1-year inflation forecast was adjusted lower to 3.9% from the preliminary estimate of 4.0%, where it was expected to remain, and down from December’s 4.4% rate.  

• Nissan Motor Co and Renault SA have reached an agreement to lower the French automaker’s stake in the Japanese carmaker to 15% from 43%, the Nikkei business daily reported this morning. 
• American Express Company reported adjusted Q4 earnings of $2.07 per share, below the expected $2.23, with revenues declining 17.4% yoy to $14.18 billion, south of the forecasted $14.23 billion. However, the company said it sees FY2023 EPS within a range of $11.00 to $11.40, and revenue growth of between 15-17%, above the Street’s respective forecasts of $10.53 per share and an 11.1% increase in sales. Additionally, the company said it plans to up its quarterly dividend by 15% to $0.60 per share.   
• Chevron Corporation reported Q4 earnings of $4.09 per share ex-items, missing the $4.33 that analysts were expecting, while revenues rose 17.3% yoy to $56.47 billion, compared to forecasts calling for $52.68 billion. The company cited $1.1 billion in write-downs in its international operations, as well as the decline in oil and gas prices. The results come in the wake of its announcement on Thursday that it will increase its quarterly dividend by roughly 6.0% to $1.51 per share, and that it will repurchase $75.0 billion of its shares. 
• Bitcoin is set for its best January since 2013 on bets that monetary tightening and the crypto-sector crisis are both ebbing. The largest token is up over 40% since the turn of the year, a first-month gain bettered only twice before when crypto was in its infancy. Smaller coins like Solana, Axie Infinity and Decentraland have doubled in value, part of a $280 billion January climb in digital assets overall. 
• This will be another very busy week with central banks meetings in US, UK, and Euro Area and US non-farm payrolls report taking central stage. Also, investors will follow inflation and GDP growth rates for major European economies including Germany, France, and Italy. Finally, it will be worth following new PMI readings for the US, China, and Australia.  On the corporate front, earnings reports are due from McDonald’s and General Motors on Tuesday, followed by tech giants Apple, Meta Platforms, Amazon and Alphabet later in the week.