Equities seen higher ahead of US GDP data

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 came well off their lows of the day yesterday to finish nearly where they began, as the Street sifted through a slew of mixed results with Q4 earnings season kicking into gear. The Dow Jones Industrial Average and the S&P 500 both ended practically flat while the Nasdaq Composite declined by 0.2% to 11,313. Shares in Europe closed slightly lower on Wednesday, extending losses from the previous session, with the benchmark Euro Stoxx 50 falling 0.1% to finish at 4,148. Tech shares were among the worst performers, pressured by Microsoft Corp. 

Summary as at 26.01.2023 

• Asian equity markets mostly rose this morning as risk sentiment improved, with Hong Kong Kong returning from the Lunar New Year holidays. Investors also assessed data showing South Korea’s economy contracted in Q4 for the 1st time since 2020, while the BOJ emphasized the need to maintain the policy. Shares in New Zealand, South Korea, and Kong gained, while Japanese equities fell. 
• European shares are headed for gains amid a positive tone for risk-taking that has sent US futures higher. A batch of US economic data is on the docket today, including fourth-quarter GDP. 
• Oil prices rose in early trade on Thursday, attempting to recoup recent losses amid hopes of continued demand recovery in China as a weaker dollar made greenback-priced commodities more attractive for foreign buyers. 
• The German economy will grow this year and might even avoid a shallow recession in the short term, the government said on Wednesday, the latest sign of brightening growth prospects in Europe. Europe’s largest economy is likely to expand by 0.2% this year, the German Economy Ministry said in its annual economic report, revising up an autumn forecast for a 0.4% contraction. 
• UK car production fell 17.9% yoy in December, turning negative after experiencing growth in October and November. Meanwhile, British annual car production dropped 9.8% in 2022 due to global semiconductor shortages, significant structural changes, and the impact of Covid-related supply chain shutdowns in China. Still, UK factories produced a record amount of electric vehicles last year which grew 4.5% from 2021 and accounted for nearly one-third of total car production. 
• Tesla reported better-than-expected profits in the latest quarter, even as it gave mixed signals on the outlook for growth in vehicle deliveries. The company said it would increase output “as quickly as possible” – in line with previous guidance for average annual growth of 50% over multiple years. However, Tesla said it’s on track to deliver about 1.8 million vehicles this year, representing a production jump of about 37%. 
• IBM on Wednesday joined the wave of companies making layoffs, saying it would cut about 3,900 jobs. The cuts will stem from its services business which it spun off last year, and its healthcare divestiture, from which the company will incur about a $300 million charge.  
• STMicroelectronics reported Q4 sales ahead of market expectations this morning, despite challenging economic conditions, benefiting from strong customer demand. The firm’s net revenue rose to $4.42 billion compared to $4.32 billion in the previous quarter. Analysts had on average expected sales of $4.32 billion. The firm made Q4 diluted EPS of $1.32, beating analysts average estimate of $1.09. Rival Texas Instruments yesterday forecasted Q1 revenue and profit below Wall Street targets.