The week started slowly in Asia, as many markets were closed due to the Chinese New Year holiday. But those that were open benefited from the positive vibes from the US markets last Friday.
US equities rally, led by tech stocks
The S&P500 rallied 1.89% and flirted with the 200-DMA again, and closed the week a stone’s throw from the ceiling of the 2022-to-date bearish trend.
Nasdaq did even better. The index rallied 2.86%, boosted by a well-deserved 8.50% rally from Netflix – which not only announced better-than-expected results in the Q4, but also a mouth-watering beat on the subscription growth end, with 7.7 mio new subscribers – a number that we thought we would hear only during a pandemic!
Google, on the other hand, jumped 5.72%, but for a less glamorous reason. The company said it will fire 6% of its workforce, which is around 12’000 jobs globally. Investors heard ‘yes, that will clearly improve the cloud profitability!’
In total, Amazon, Microsoft and Google will be cutting 40’000 jobs.
Fed’s quiet period
The quiet period for Federal Reserve (Fed) officials will help us digest what has been said over the past weeks.
In summary, we know that the Fed will further slow the size of its rate hikes in the coming months. $
But the fact that the Fed will raise by only 25bp next meeting doesn’t mean that it won’t continue hiking the rates. The rates will likely go above 5% in the Q1.
Focus on earnings
Microsoft, Johnson&Johnson, General Electric,Texas Instruments, Intel, Tesla Mastercard, Visa, Chevron and American Express are among companies that will go to the earnings confessional this week.
Big Tech earnings projections are down by about 5% since October.
Yet, expectations went sufficiently low that there is plenty of room for a positive surprise, as has been the case with Netflix.
FX and energy
The dollar kicked off the week under pressure. The EURUSD already hit the 1.09 mark early in the session, for the first time since last April, and is just a couple of pips away from the major 50% retracement on 2021-2022 selloff.
PMI data due tomorrow could confirm that the European economies took a softer hit thanks to mild start to the winter, and cheaper energy prices as a result of it.
And sufficiently strong PMI data, combined to the negative pressure in the US dollar into the Fed meeting, could help the EURUSD take a chance on the 1.10 resistance in the coming sessions.
In energy, crude oil posted its second straight week of gains on Friday, as the Chinese reopening story and prospects of higher global demand, and around 1 mbpd gap between supply and demand outweighed the recession fears.
The latest rebound in European nat gas prices, and the fact that we now have cold and snow in Europe could also tilt the balance further to the upside.
The barrel of American crude spent last week above the 50-DMA, now around $78pb, but couldn’t clear the 100-DMA, which stands around $82pb.
The next target for the oil bulls is a move above the $82pb, for a potential extension of gains toward the $87/88 range.
