FUNDAMENTAL NEWS AND TECHNICAL ANALYSIS REPORT – 17 JANUARY 2023

17 Jan 2023

As the BoE worries about inflation, UK salary growth picks up again

Asian stock market closes in green on Monday. The Shanghai Composite is up 1.01% at 3227.59. Overall, the Singapore MSCI is up 1.05% at 297.20. Over in Hong Kong, the Hang Seng Index is up 0.04% at 21746.72. In Japan, the Nikkei 225 is down 1.14 at 25822.32. While the Topix index is down 0.88% at 1886.31 South Korea’s Kospi is up 0.58% at 2399.86. Australia S&P/ASX 200 up 0.82% at 7388.20.

Top News of the Day:

The pace of pay growth in Britain – which is being closely watched by the Bank of England as it gauges how much higher to raise interest rates – picked up more pace in the three months to November, official data showed on Tuesday.

Pay excluding bonuses rose by an annual 6.4% in the September-to-November period, the biggest increase since records began in 2001 excluding jumps during the COVID-19 period which were distorted by lockdowns and government support measures.

Pay including bonuses also rose by 6.4%, the Office for National Statistics said.

Economists polled by Reuters had expected total pay and the ex-bonuses measure to rise by 6.2% and 6.3% respectively.

The ONS said Britain’s unemployment rate held at 3.7%, as expected by most of the economists polled by Reuters, close to its lowest level in almost 50 years.

The Bank of England is worried that the acceleration in pay growth will make Britain’s high inflation rate – currently running above 10% – harder to bring down.

Market Summary as per 16/01/2023:

European equities Monday closing. The DAX futures contract in Germany traded up 0.31%% at 15134.04, CAC 40 futures up 0.28% at 7043.31. UK 100 futures contract in the U.K. up 0.20 at 7860.07

In the U.S. on Wall Street, the Dow Jones Industrial Average Closed up 0.33% at 34302.61. The S&P 500 up 0.40% at 3999.09 and the Nasdaq 100 up 0.71% at 11079.16, NYSE closes 0.37% up at 15918.04.

Top Market News Today:

In the Forex market, GBPUSD up 0.24% at 1.2219. The USDJPY up 0.03% at 128.48, The USDCHF down 0.25 at 0.9233. EURUSD up 0.09% at 1.0831. EUR/GBP down 0.05% at 0.8865. The USD/CNY up 0.55% at 6.7688 at the time of writing.

In the Commodity market U.S. Gold futures down at 0.34% $1,910.89. Elsewhere, Silver futures down 1.05% at $24.03 per ounce, Platinum down 0.94% at $1053.00 per ounce, and Palladium down 0.37% at $1742.31.

Brent Crude Oil up 0.12% at $84.56 per barrel.

In the Cryptocurrency Markets, Bitcoin at 21135.20 up at 0.06%, Ethereum down 0.45% at 1562.69, Litecoin at 85.83 up 0.01%, at the time of writing.

Top Market Segment to Watch Out Today:

BITCOIN- Bitcoin is on the charge in 2023, dragging the crypto market off the floor and electrifying bonk.

The No.1 cryptocurrency has clocked a 26% gain in January, leaping 22% in the past week alone, breaking back above the $20,000 level and putting in on course for its best month since October 2021 – just before the Big Crypto Crash.

Economic News:

US: – U.S. consumers believe price pressures will ease considerably over the next 12 months, with a survey on Friday showing their one-year inflation outlook falling in January to the lowest level since the spring of 2021.

The University of Michigan Surveys of Consumers said the one-year inflation outlook slipped to a preliminary reading of 4.0% this month from 4.4% in December. That was the lowest reading since April 2021. At the five-year horizon, the outlook rose to 3.0% from 2.9% last month, staying within the narrow 2.9%-3.1% range for 17 of the last 18 months.

The survey came on the heels of government data on Thursday showing consumer prices fell for the first time in more than 2-1/2 years in December. Inflation is abating as the Federal Reserve’s aggressive interest rate hikes cool demand, and supply chain bottlenecks ease.

With inflation subsiding, consumers’ spirits are perking up. The University of Michigan’s preliminary January reading on the overall index of consumer sentiment came in at 64.6, up from 59.7 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 60.5.

Euro Zone: –

The U.K. labour market stayed stronger than expected in December, with the number of benefit claimants rising only moderately.

At the same time, wage growth in November, the last month for which data are available, grew more strongly than expected, rising 6.4% on the year, according to the Office for National Statistics.

The figures add to last week’s GDP data in suggesting that the U.K. economy may have fared better at the end of the year than seemed likely only a couple of months earlier as the appointment of Rishi Sunak as Prime Minister ended a turbulent time for the bond markets and the government’s energy price caps cushioned a heavy blow to disposable income.

The claimant count rose by 19,700, rather than the 19,800 expected by economists, while November’s data were revised down to show an increase of only 16,100, rather than the 30,500 initially reported.

However, they also suggest a growing risk of a wage-price spiral, as inflation forces people to push for ever-bigger pay increases to defend their purchasing power.

The ONS said that this represented the strongest-ever growth in regular pay, outside of the pandemic period. Private-sector wages in particular grew 7.2% on the year in the three months through November, while public-sector pay rose 3.3%. However, adjusted for inflation, real wages fell 2.2%.

Samuel Tombs, U.K. economist at Pantheon Macroeconomics, said via social media that it’s now “very hard to see” the Bank of England slowing the pace of its interest rate increases at its next meeting.

Top Economic Releases Today:

USD: NY Empire State Manufacturing Index (Jan) Forecast –8.70, Previous-11.20 at 19:00
CNY: Industrial production (YoY) (Dec) Actual 1.3%, Forecast 0.2%, previous 2.2% at 07:00
CNY: GDP (YoY) (Q4) Actual 2.9%, Forecast 1.8%, Previous 3.9% at 07:30
EUR: German CPI (YoY) (Dec) Actual 8.6%, Forecast 8.6%, Previous 10.0% at 12:30
GBP: Average Earning Index +Bonus (Nov) Actual 6.4%, Forecast 6.2%, Previous 6.1% at 12:30