The Fed And Earnings On Tap

Overview:  Risk appetites seem subdued even if GameStop's (GME) surge draws attention.  Asia Pacific equities mostly slipped lower, and profit-taking was seen in Hong Kong and Seoul, which are off to an incredibly strong start to the year.  Small gains were reported in Tokyo, Beijing, and Taipei.   Europe's Dow Jones Stoxx 600 opened lower but quickly recovered, with the help of the communications, real estate, and consumer discretionary sectors.  US shares are a little heavy, but the Nasdaq futures are trading with a firmer bias.  Apple, Facebook, Tesla, and Boeing are among the corporates reporting earnings today.  Benchmark 10-year bonds (SPTL) are little changed, with the US Treasury yield around 1.04%.  Italian bonds are firm despite the collapse of the government.  The market's confidence that this will be resolved without going to elections is behind the 13 bp decline in yields since the beginning of the week.  The dollar is mostly firmer.  The Scandis and Australian dollar are bearing the brunt and are off 0.3%-0.5% in late morning turnover in Europe.  Although some of the Asian currencies are higher, the freely accessible currencies are mostly lower.  Gold (GLD) is straddling the 200-day moving average, a little below $1850.  The yellow metal is taking a four-day losing streak into today, its longest slide since last April.  A break of the $1840 level could signal a return to the $1800 area.  March WTI is firm but in a narrow range around $53 a barrel.

Asia Pacific

Australia's Q4 20 CPI was softer than in Q3 but still above expectations.  The headline CPI rose by 0.9% in the last three months of 2020, down from 1.6% in Q3, but a touch higher than the 0.7% forecast by the median response in the Bloomberg forecast.  The year-over-year rate ticked up to 0.9% from 0.7%.  The trimmed and weighted mean measures also edged higher.  The figures do not change the outlook for policy.  The RBA meets next week.  Its forward guidance says no rate hike until inflation is sustainably in the 2-3% range.  This will likely require stronger wage growth.  It is also notable that tradable goods prices were off 0.4%, while non-tradable prices rose 1.5%, flattered by a hike in tobacco taxes.  

China reported that the profits of its industrial firms rose by 20.1% in December.  It was the seventh month of double-digit gains. Last year, profits increased by 4.1% to CNY6.5 trillion (~$1 trillion) after declining in 2019.  Last year, profits at state-owned enterprises fell by 2.9% while rising by 3.1% in the private sector.  Stronger production and exports helped lift profits, and producer prices edged higher in December for the first time since the start of the year.  The steel sector bears watching.  Rising iron ore prices have boosted input prices as demand weakens ahead of the Lunar New Year,  and Beijing is trying to curb new capacity.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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