Fundamental News And Technical Analysis Report – 05 January 2023

05 Jan 2023

After hawkish Fed minutes, the dollar increases slightly

Asian stock market closes in green on Wednesday. The Shanghai Composite is up 0.22% at 3123.52. Overall, the Singapore MSCI is up 0.52% at 291.85. Over in Hong Kong, the Hang Seng Index is up 3.22% at 20793.11. In Japan, the Nikkei 225 is down 1.45 at 25716.86. While the Topic index is down 1.25% at 1868.15 South Korea’s Kospi is up 1.68% at 2255.98. Australia S&P/ASX 200 up 1.63% at 7059.20.

Top News of the Day:

The dollar inched up on Thursday but struggled to make bigger gains as the boost from a still hawkish Federal Reserve was tempered by investors’ growing appetite for riskier assets, driven by China’s reopening.

Minutes of the Fed’s December policy meeting released overnight showed while officials agreed that the central bank should slow the pace of aggressive interest rate increases, they remained focused on curbing inflation, and were worried about any “misperception” in financial markets that their commitment was flagging.

Minneapolis Fed President Neel Kashkari also said on Wednesday he saw the Fed’s target interest rate peaking at 5.4%, higher than current market expectations of just under 5%.

The greenback gained some ground on Thursday after a muted reaction to the Fed’s hawkish rhetoric overnight, with sterling last 0.16% lower at $1.2039, after rising 0.76% in the previous session.

“The minutes were largely within expectations — no cuts expected (this year), that’s what the dot plot was already pricing,” said Christopher Wong, a currency strategist at OCBC.

Market Summary as per 04/01/2023:

European equities Wednesday closing. The DAX futures contract in Germany traded up 2.81% at 14490.78, and CAC 40 futures up 2.30% at 6776.43. UK 100 futures contract in the U.K. up 0.41 at 7585.19

In the U.S. on Wall Street, the Dow Jones Industrial Average closed down 0.08% at 33108.90. The S&P 500 is up 0.19% at 3831.33 and the Nasdaq 100 up 0.33% at 10421.06, NYSE closes 1.29% up at 15350.30.

Top Market News Today:

In the Forex market, GBPUSD is down 0.23% at 1.2023. The USDJPY is down 0.16% at 132.38, and The USDCHF up 0.07 at 0.9297. EURUSD up 0.06% at 1.0607. EUR/GBP up 0.33% at 0.8823. The USD/CNY is down 0.21% at 6.8722 at the time of writing.

In the Commodity market U.S. Gold futures up at 0.04% $1,854.72. Elsewhere, Silver futures up 0.08% at $23.75 per ounce, Platinum up 0.35% at $1079.81 per ounce, and Palladium up 0.23% at $1790.00.

Brent Crude Oil up 0.85% at $78.55 per barrel.

In the Cryptocurrency Markets, Bitcoin is at 16795.40 down 0.30%, Ethereum is down 0.62% at 1248.49, and Litecoin at 74.95 down 0.61%, at the time of writing.

Top Market Segment to Watch Out for Today:

NATURAL GAS: Natural gas jumps almost 5%, after a 5-day selloff to below $4.

It’s still early to tell, but Wednesday’s near 5% rebound in natural gas futures on the New York Mercantile Exchange’s Henry Hub threw a lifeline to those long the market — after five straight days of selling that took the fuel’s pricing beneath key $4 support, wiping out a quarter of its value.

“NYMEX gas futures prices have slowed their capitulation, and signs of being oversold are emerging,” Houston-based energy markets consultancy Gelber & Associates said, adding that the final arbiter for direction would be weekly gas storage data due on Thursday.

Economic News:

US: – Inflation in the United States has not “turned the corner yet” and it is too early for the Federal Reserve to declare victory in the fight against rising prices, a top IMF official said in an interview with the Financial Times on Thursday.

Gita Gopinath, a deputy managing director of the Fund, urged the U.S. central bank to press ahead with rate rises this year.

She said it was important for the Fed to “maintain restrictive monetary policy” until a “very definite, durable decline in inflation” was evident in wages and industries not related to food or energy.

“If you see the indicators in the labour market and if you look at very sticky components of inflation like services inflation, I think it’s clear that we haven’t turned the corner yet on inflation,” she told the newspaper.

The comments follow Wednesday’s data showing that job openings, closely watched as a proxy for labour market shortages and pressure on employers to hand out wage increases higher than normal, fell only moderately in November in the United States.

Minutes of the Fed’s Dec. 13-14 policy meeting, published on Wednesday, showed that officials agreed that the central bank now needed to balance its fight against price pressures with the risks of slowing the economy too much.

In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the Ukraine war as well as inflation pressures and high-interest rates engineered by central banks to rein in those price pressures.

In the interview, Gopinath added that she expected China’s economy to suffer significantly in the near term. A rebound is possible later this year, however, as Chinese demand recovers, the report quoted her as saying.

Euro Zone: –

Britain’s government will set out next week how it intends to scale back subsidies for businesses’ soaring energy costs, after finance minister Jeremy Hunt described the current programme as “unsustainably expensive”.

The current six-month programme, which runs until the end of March, was predicted to cost 18.4 billion pounds ($22.2 billion) when the government’s budget watchdog published forecasts in November.

British natural gas prices began to pick up sharply in the second half of 2021, and soared after Russia invaded Ukraine in February 2022. They have been volatile since, and although they are now back around the same level as a year ago, they are still several times higher than in early 2021.

Britain’s finance ministry said on Wednesday that Hunt would announce the result of a review into business energy support when parliament returns next week from its Christmas break.

However, when Hunt met businesses on Wednesday, he warned them that any future subsidies would be smaller and described the current scheme as “unsustainably expensive”, with costs potentially running into the tens of billions if it continued.

“No government can permanently shield businesses from this energy price shock,” the finance ministry said.

“The chancellor explained that any future support, while at a lower level, would be designed to help them transition to the new higher price environment and avoid a cliff edge in support,” the ministry added.

Business groups expressed concern at the prospect of reduced support. Emma Mcclain, who met Hunt on Wednesday as chief executive of the British Beer and Pub Association, said scaled-back subsidies would be “the last straw” for many pubs.