FUNDAMENTAL NEWS AND TECHNICAL ANALYSIS REPORT – 01- FEBRUARY-2023

01 Feb 2023

Record bond purchases by the BOJ illustrate the difficulty in managing yields

Asian stock market closes in red on Tuesday. The Shanghai Composite is red 0.42% at 3255.67. Overall, the Singapore MSCI is down 0.12% at 306.98. Over in Hong Kong, the Hang Seng Index is down 1.03% at 21842.33. In Japan, the Nikkei 225 is down 0.37 at 27327.11. While the Topix index is down 0.36% at 1975.27, South Korea’s Kospi is down 1.04% at 2425.08. Australia S&P/ASX 200 down 0.67% at 7476.70.

Top News of the Day: –

The Bank of Japan bought a record $182 billion worth of government bonds in January, data showed on Wednesday, underscoring its resolve to defend its yield cap from attack by investors betting on a near-term interest rate hike.

The massive buying highlights the increasing difficulty the central bank faces in sustaining its yield control policy, as inflation perks up well above its 2% inflation target.

With its heavy-handed intervention drying up bond market liquidity, the BOJ is increasingly relying on a new funds-supply tool to keep the 10-year yield from breaching its 0.50% ceiling.

Market Summary as per 31/01/2023:

European equities Tuesday closing. The DAX futures contract in Germany traded up 0.01% at 15128.27, CAC 40 futures up 0.01% at 7082.42. UK 100 futures contract in the U.K. down 0.17 at 7771.70.

In the U.S. on Wall Street, the Dow Jones Industrial Average Closed up 1.09% at 34086.04. The S&P 500 up 1.46% at 4076.60 and the Nasdaq 100 up 1.67% at 11584.55, NYSE 1.37% closes at 16036.39.

Top Market News Today:

In the Forex market, GBPUSD down 0.05% at 1.2312. The USDJPY up 0.15% at 130.27, The USDCHF up 0.05 at 0.9158. EURUSD up 0.15% at 1.0877. EUR/GBP up 0.23% at 0.8831. The USD/CNY down 0.10% at 6.7470 at the time of writing.

In the Commodity market U.S. Gold futures down at 0.20% $1,924.71. Elsewhere, Silver futures down 0.54% at $23.58 per ounce, Platinum up 0.37% at $1014.38 per ounce, and Palladium down 0.06% at $1648.91.

Brent Crude Oil up 0.43% at $85.83 per barrel.

In the Cryptocurrency Markets, Bitcoin at 23092.20 down at 0.15%, Ethereum down 0.51% at 1577.23, Litecoin at 96.15 up 2.15%, at the time of writing.

Top Market Segment to Watch Out Today:

NATURAL GAS– The bears in natural gas aren’t throwing in the towel yet as the debate rages on whether the market has bottomed ahead of the arrival of delayed winter chills.

New data pointing to higher production of dry gas also offset any bullish sentiment on the market, analysts said.

The front-month March gas contract on the New York Mercantile Exchange’s Henry Hub settled virtually flat at 2.684 per MMBtu, or metric million British thermal units, after hitting a 21-month bottom at $2.615. The last time a front-month gas contract on the Henry Hub went lower than that was on April 15, 2021, when it struck an intraday bottom of $2.583.

Economic News:

US: – An American official made the most direct comments by a U.S. authority to date acknowledging the existence of a deal with Japan and the Netherlands for those countries to impose new restrictions on exports of chipmaking tools to China.

“We can’t talk about the deal right now,” Deputy Commerce Department Secretary Don Graves said on the side-lines of an event in Washington. “But you can certainly talk to our friends in Japan and the Netherlands.”

Bloomberg reported on Friday an agreement had been finalized and two people familiar with the matter later confirmed the news to Reuters.

The United States in October imposed sweeping export restrictions on shipments of chipmaking tools to China, seeking to hobble Beijing’s ability to supercharge its chip industry and enhance its military capabilities.

For the restrictions to be effective, though, Washington needed to bring on board the Netherlands and Japan, home to chipmaking powerhouses ASML and Tokyo Electron, among others.

The Commerce Department said in an email it will continue to coordinate on export controls with allies.

“We recognize that multilateral controls are more effective than unilateral controls, and foreign engagement on these controls is a … priority,” the agency said.

Officials from the Netherlands and Japan were in Washington discussing a wide range of issues in talks led by White House national security adviser Jake Sullivan on Friday.

When asked on Friday if an agreement on semiconductors had been discussed, U.S. President Joe Biden said: “Yes, we talked about a lot of things, but a lot of it is private.”

Euro Zone: – Up to half a million British teachers, civil servants, train drivers and university lecturers will strike on Wednesday in the largest coordinated action in a generation which the government says will cause widespread disruption.

The mass walkouts will see schools close, the military on standby to help at Britain’s borders, and no rail services running across much of the country.

Union leaders estimate up to 500,000 people will take part, the highest number for at least a decade, and there will be rallies against a planned new law to curb strikes in some sectors, a proposal they argue will poison relations further.

“After years of brutal pay cuts, nurses, teachers and millions of other public servants have seen their living standards decimated – and are set to face more pay misery,” said Paul Nowak, General Secretary of the Trades Union Congress (TUC), the union umbrella group.

“Instead of scheming up new ways to attack the right to strike, ministers should get pay rising across the economy – starting with a decent pay rise for workers across the public sector.”

The government says “mitigations” will be in place but the strikes would have a significant impact.

“We are up front that this will disrupt people’s lives, and that is why we think that negotiations rather than picket lines are the right approach,” Prime Minister Rishi Sunak’s spokesperson told reporters.

With inflation running at more than 10% – the highest level for four decades – Britain has seen a wave of strikes from health and transport workers to Amazon Warehouse employees and Royal Mail Postal staff.

They are demanding above-inflation pay rises to cover rocketing food and energy bills that they say has left them stressed, feeling under-valued and struggling to make ends meet.

On Wednesday, about 300,000 teachers will take action, along with 100,000 civil servants from more than 120 government departments, and tens of thousands of university lecturers and rail workers.

Next week, nurses, ambulance staff, paramedics, emergency call handlers and other healthcare workers are set to stage more walkouts, while firefighters this week also backed a nationwide strike.

Top Economic Releases Today:

USD: ISM Manufacturing PMI (Jan) Forecast 48.0, Previous 48.4 at 20:30
USD: Crude Oil Inventories Forecast 0.376M, Previous 0.533M at 20:30
EUR: CPI (YoY) (Jan) Forecast 9.0%, Previous 9.2% at 15:30
EUR: German Manufacturing PMI (Jan) Forecast 47.0, Previous 47.1 at 15:00
NZD: Employment Change (QoQ) (Q4) Actual 0.2%, Forecast 0.3%, Previous 1.3% at 03:15