Fundamental News And Technical Analysis Report – 07 February 2023

07 Feb 2023

The RBA increases interest rates as anticipated and warns that additional increases are forthcoming.

Asian stock market closes in red on Monday. The Shanghai Composite is in red at 0.76% at 3238.70. Overall, the Singapore MSCI is down 0.76% at 306.30. Over in Hong Kong, the Hang Seng Index is down 2.02% at 21222.16. In Japan, the Nikkei 225 is up 0.67 at 27693.65. While the Topix index is up 0.45% at 1979.22, South Korea’s Kospi is down 1.70% at 2438.19. Australia S&P/ASX 200 is down 0.25% at 7539.00.

Top News of the Day: –

The Reserve Bank of Australia raised interest rates as expected on Tuesday and flagged more hikes this year as it moves to control overheated inflation, but also warned that economic growth is likely to slow in the near term.

The RBA hiked its cash target rate by 25 basis points to an over-10-year high of 3.35%, having now raised rates by a cumulative 325 bps in this rate hike cycle.

RBA Governor Philip Lowe said in a statement that more interest rate hikes were still needed, given that inflation is trending well above the central bank’s target rate of 2% to 3%.

“Further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary,” Lowe said in a statement.

The Australian dollar reacted positively to the RBA’s statement, rallying 0.8% to 0.6936 against the USD.

Market Summary as per 06/02/2023:

European equities Monday closing. The DAX futures contract in Germany traded down 0.84% at 15345.91, CAC 40 futures down 1.34% at 7137.10. UK 100 futures contract in the U.K. down 0.82 at 7836.71.

In the U.S. on Wall Street, the Dow Jones Industrial Average Closed down 0.10% at 33891.02. The S&P 500 down 0.61% at 33891.02 and the Nasdaq 100 down 1.00% at 11887.45, NYSE 0.65% closes down at 15895.4.

Top Market News Today:

In the Forex market, GBPUSD up 0.31% at 1.2055. The USDJPY down 0.36% at 132.14, The USDCHF down 0.25 at 0.9259. EURUSD up 0.14% at 1.0740. EUR/GBP down 0.12% at 0.8909. The USD/CNY down 0.15% at 6.7812 at the time of writing.

In the Commodity market U.S. Gold futures up at 0.37% $1,874.31. Elsewhere, Silver futures up 0.55% at $22.35 per ounce, Platinum up 0.23% at $971.72 per ounce, and Palladium down 0.31% at $1590.00.

Brent Crude Oil up 1.07% at $82.13 per barrel.

In the Cryptocurrency Markets, Bitcoin at 23030.00 down at 0.35%, Ethereum up 1.18% at 1633.10, Litecoin at 98.81 up 3.03%, at the time of writing.

Top Market Segment to Watch Out for Today:

NATURAL GAS– Natural gas inches up after weekly drop to more than 2-year lows.

Natural gas prices inched higher Tuesday as buyers emerged at the lower level for the heating fuel, hammered to more than two-year lows by a selloff triggered by a largely warm winter for the 2022/23 season.

Economic News:

US: – U.S. stocks may fall further, and bond yields rise, as the Federal Reserve continues its current round of interest-rate hikes in coming months, according to an analysis published Monday by the San Francisco Fed.

Financial conditions have already tightened significantly, starting even before the U.S. central bank began raising interest rates last March to fight 40-year-high inflation, as investors anticipated the Fed’s actions.

Assuming the Fed follows through on its projections from December for the policy rate to go to 5.1% by May and for inflation to fall to 3.1% by then, the Fed will have delivered the sharpest round of policy tightening on record, the San Francisco Fed researchers wrote.

Though stock prices historically tend to rise at the tail end of Fed policy tightening cycles, this time may be different, according to the analysis from San Francisco Fed senior research advisor Simon Kwan and research associate Louis Liu.

Based on how asset prices have behaved in prior tightening cycles, they wrote, “stock prices are projected to decline further” along with “more tightening in the bond market.” That is in large part because of how easy policy was at the starting point of this cycle, with the Fed funds rate near zero even as inflation was rising, producing a historically large negative “real rate gap.”

“While the rapid tightening of financial conditions is expected to slow the economy relatively quickly, historical experiences raise the possibility of even more tightening in financial conditions given the large real rate gap that needs to be closed,” they wrote.

Euro Zone: – Spending by shoppers at British retailers grew less quickly in January but the overall picture looked a bit brighter as consumers treated themselves to cinema trips and booked holidays, surveys showed on Tuesday.

The British Retail Consortium said spending in store chains rose by 4.2% in annual terms in January, weaker than December’s 6.9% rise and lagging behind inflation which signified a fall in sales volumes.

“As we head into a difficult time for consumers, the short-term outlook for the retail sector remains challenging,” Paul Martin, UK head of retail at KPMG which co-produces the figures, said.

“With the latest interest rate rise and utility price increases heading our way, shrinking household incomes means we will continue to see a shift in what consumers buy and where they buy from.”

The Bank of England last week raised interest rates for the 10th time in a row to 4%, their highest since 2008, as it sought to counter risks from an inflation rate above 10%. The central bank said it saw Britain going into a recession from early 2023.

But figures from Barclays (LON: BARC) Showed some strength in consumer demand.

Total spending on Barclays payment cards rose by 9.7% last month from January 2022, helped by a 66% jump in holiday bookings and a 21% rise in entertainment spending on the back of the release of new movies such as “Avatar: The Way of Water.”

The growth comparisons were flattered by last January’s coronavirus restrictions, and colder weather in January this year pushed up spending on utilities by 45%.

But consumers appeared to be taking a more optimistic view with Barclays’ confidence measure rising to 63%, its highest since last July.

“While it’s encouraging that confidence in household finances saw a slight boost, it is clear that Brits will still need to find ways to manage their budgets over the coming months amid rising grocery price inflation and mounting utility bills,” Esme Harwood, a director at Barclays, said.

Top Economic Releases Today:

USD: Fed Chair Powell Speaks at 23:10
USD: EIA Short-Term Energy Outlook at 22: 30
AUD: RBA Interest Rate Decision (Feb) Actual 3.35%, Forecast 3.35%, Previous 3.10% at 09:00
AUD: RBA Rate Statement at 09:00
JPY: Household Spending (YoY) (Dec) Actual –1.3%, Forecast –0.2%, Previous –1.2% at 05:00