Fri, Feb 03, 2023 @ 17:59 GMT
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Stocks Rise after Weaker than Forecast Retail Sales, PPI Data

US futures

  • Dow futures +0.04% at 33926
  • S&P futures +0.2% at 3999
  • Nasdaq futures +0.3% at 11597

In Europe

  • FTSE -0.01% at 7845
  • Dax +0.18% at 15200

Hawkish Fed bets ease after soft data

US stocks are set to open higher as investors digest the latest corporate earnings as well as weaker-than-forecast economic data.

PPI cooled by more than expected to 6.2% YoY in December, down from 7.8% in November and below forecasts of 6.8%.

Retail sales were also weaker than forecast, dropping 1.1% MoM, down from -0.6% in November and below estimates of -0.8%.

The data supports the view that the Federal Reserve could slow the pace of rate hikes in the coming meetings on fears of the impact on the consumer.

Reflecting receding hawkish Fed bets, stocks rose, and the USD accelerated its decline. Gold also pushed higher towards 1920.

At the World Economic Forum in Davos, the speakers sounded cautiously upbeat. IMF’s second in command Gita Gopinath, said that the global economy had shown signs of resilience and the peak inflation had passed. Meanwhile, China’s Vice President Liu He said that the Chinese economy is expected to normalise following the re-opening. Additionally, German Chancellor Olaf Scholz also said believes Germany will avoid a recession.

Corporate news

Tesla rises pre-market after sales in China soar following price cuts.

Moderna rises 7.7% after the drug maker said that is RSV vaccine is effective with older adults, and it is expected to file approval with the FDA this year.

United Airlines flies high after reporting solid Q4 numbers on robust demand and also forecasts a four-fold rise in full-year profit guidance for 2023.

Where next for the Nasdaq?

The Nasdaq is extending its recovery from 10668 at the end of December. The rise above the 50 sma, combined with the RSI above 50 supports, could keep buyers hopeful of further upside. Buyers could look for a rise above 12000 the psychological level and the 200 sma. A rise above here would be significant because it would mark the first time in a year that the price has risen over the resistance. Above 12000, 12,230 the December high comes into play. On the flip side, a move below the 50 sma at 11440 could bring 10668 back into focus.

FX markets – USD falls, GBP rises

The USD is falling sharply following the release of worst-than-expected retail sales and PPI inflation. The data has raised bets that the Fed will act more restrained when hiking rates.

GBP/USD is rising towards 1.24 after UK data showed that inflation was proving to be sticky. Headline CPI called to 10.5% YoY in December, down from 10.7%. Meanwhile, core inflation held steady at 6.3%, defying expectations of a fall. The data, along with yet yesterday’s figures highlighting the tight labour market, mount pressure on the BoE to hike rates by 50 basis points again in February, lifting the pound.

EUR/USD is rising rebounding from losses yesterday. The euro fell yesterday on rumours but the ECB would look to slow the pace of rate hikes to 25 basis points from March. However, today at Davos ECB ‘s Villeroy, the French central bank governor said that the ECB Lagarde’s guidance was still valid. Lagarde had said that 50 basis point hikes could be needed for the next three meetings.

GBP/USD +0.8% at 1.24

EUR/USD +0.3% at 1.0853

Oil rises to a monthly high

Oil prices are rising for a second straight day, climbing to the highest level since early December as investors digest the latest oil report from the International Energy Agency and from OPEC.

According to the IEA, global oil demand is expected to rise to an all-time high in 2023 as China rolls back its COVID restrictions. Demand for crude oil could rise to a record 101.7 million barrels per day. Meanwhile, supply could remain constrained owing to the evolving impact of sanctions on Moscow.

The IEA report followed the OPEC monthly oil report which also highlighted expectations of growing demand from China, up by 510,000 barrels per day, After contracting in 2022 for the first time due to the covered restrictions.  OPEC capped its 2023 global demand forecast unchanged.

Looking ahead, API inventory data is due later.

WTI crude trades +1.65% at $80.45

Brent trades at +1.45% at $83.80

Looking ahead

14:30 Fed Bullard speech

19:00 Fed Beige Book

21:30 API oil inventories
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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