FUNDAMENTAL NEWS AND TECHNICAL ANALYSIS REPORT – 20 JANUARY 2023

20 Jan 2023

Consumer inflation in Japan reaches a new 41-year high, keeping BOJ in the spotlight

Asian stock market closes in green on Thursday. The Shanghai Composite is up 0.49% at 3240.28. Overall, the Singapore MSCI is up 0.03% at 297.75. Over in Hong Kong, the Hang Seng Index is down 0.12% at 21650.98. In Japan, the Nikkei 225 is down 1.44 at 26405.23. While the Topix index is down 1.00% at 1915.62 South Korea’s Kospi is up 0.51% at 2380.34. Australia S&P/ASX 200 up 0.57% at 7435.30.

Top News of the Day:

Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2% target, hitting a fresh 41-year high and keeping alive market expectations the central bank could phase out ultra-low interest rates.

But analysts are divided on whether the Bank of Japan (BOJ) could raise rates this year, due to uncertainty on whether wages will increase enough to offset the hit to consumption from rising living costs and keep inflation sustainably around 2%.

“Companies aren’t that cautious about raising prices any more. We might see inflation stay above the BOJ’s 2% target well into autumn this year,” said Yoshiki Shinkel, chief economist at Dai-ichi Life Research Institute.

“But wages are key. If inflation stays around 2% and Japan sees significant wage hikes, the BOJ could normalise monetary policy. If it deems the pace of wage hike as insufficient, there’s an equal chance it will stand pat,” he said.

Market Summary as per 19/01/2023:

European equities Thursday closing. The DAX futures contract in Germany traded down 1.72%% at 14920.36, CAC 40 futures down 1.86% at 6951.87. UK 100 futures contract in the U.K. down 1.07 at 7747.29

In the U.S. on Wall Street, the Dow Jones Industrial Average Closed down 0.76% at 33044.56. The S&P 500 down 0.76% at 3898.85 and the Nasdaq 100 down 0.96% at 10852.27, NYSE closes 0.51% down at 15569.63.

Top Market News Today:

In the Forex market, GBPUSD down 0.19% at 1.2362. The USDJPY up 0.39% at 128.89, The USDCHF up 0.07 at 0.9160. EURUSD up 0.12% at 1.0842. EUR/GBP up 0.34% at 0.8770. The USD/CNY up 0.18% at 6.7856 at the time of writing.

In the Commodity market U.S. Gold futures up at 0.04% $1,932.78. Elsewhere, Silver futures up 0.71% at $24.00 per ounce, Platinum up 0.54% at $1037.03 per ounce, and Palladium down 0.05% at $1753.28.

Brent Crude Oil up 0.66% at $86.74 per barrel.

In the Cryptocurrency Markets, Bitcoin at 20960.30 down at 0.59%, Ethereum up 0.01% at 1551.04, Litecoin at 83.60 down 0.75%, at the time of writing.

Top Market Segment to Watch Out Today:

OIL- Oil prices were set to post a second straight weekly gain on Friday, spurred largely by brightening economic prospects for China which should boost fuel demand in the world’s second-biggest economy.

Chinese November oil demand climbed to the highest level since February, data from the Joint Organisations Data Initiative showed on Thursday. OPEC said on Tuesday that Chinese oil demand would rebound this year due to relaxation of the country’s COVID-19 curbs and drive global growth.

Economic News:

US: – U.S. manufacturers probably entered a recession in the fourth quarter of 2022, based on a range of high-frequency indicators, part of a global downturn in industrial output that is creating some slack in commodity markets.

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index fell below the 50-point threshold dividing expanding activity from a contraction in both November and December.

The Federal Reserve’s manufacturing production index declined in both November and December and showed output down 0.4% at the end of 2022 compared with 2021.

U.S. manufacturers continued to increase their selling prices in the fourth quarter, but the rate of producer price inflation has decelerated as input cost pressures have eased and demand for goods has fallen.

Producer price inflation for goods other than food and energy slowed to an annualised 4.2% in the three months ending in December 2022 from 11.5% in the three months ending in April 2022.

U.S. manufacturers also continued to increase employment, but jobs are a lagging indicator, and the rate of growth has decelerated as the sector responds to falling demand for merchandise.

Manufacturing payrolls increased at an annualised rate of 1.6% in the three months ending in December, down from annualised growth of 5.5% in the three months ending in April.

Container freight handled through the nine biggest ports slowed to 2.49 million twenty-foot equivalent units (TEUs) in November from 2.81 million in the same month a year earlier and the lowest for the time of year since 2015.

Euro Zone: –

Inflation-pinched British shoppers unexpectedly cut their spending in December, official data showed on Friday, dashing hopes for a Christmas shopping boost for the country’s flagging retail sector.

Retail sales volumes fell by 1% in December from November, the Office for National Statistics said.

A Reuters poll of economists had pointed to a 0.5% monthly rise in sales in the key Christmas month.

“Retail sales dropped again in December with feedback suggesting consumers cut back on their Christmas shopping due to affordability concerns,” Heather Bovill, the ONS’s deputy director for surveys and economic indicators, said.

Food sales had risen in November as shoppers stocked up early for Christmas, but they fell back again in December with supermarkets linking the drop to higher food prices and the rising cost of living, she said.

Compared with December 2021, sales were down by 5.8%, the biggest fall for that month in records going back to 1997.

In terms of value, spending was down by a month-on-month 1.2% from November.

Britain’s consumers are a major driver of the economy and they are expected to be cautious about their spending in 2023 as high inflation continues to erode the value of wages.

A survey published earlier on Friday showed a first drop in three months in consumer confidence in January which fell back close to its lowest level since at least 1974.

Top Economic Releases Today:

USD: Existing Home Sales (Dec) Forecast 3.96M, Previous 4.09M at 20:30
EUR: ECB President Lagarde Speaks at 15:30
CNY: PBoC Loan Prime Rate Actual 3.65%, Forecast 3.65%, Previous 3.65% at 06:45
GBP: Retail Sales (MoM) (Dec) Actual –1.0%, Forecast 0.5%, Previous –0.4% at 12:30
CAD: Core Retail Sales (MoM) (Nov) Forecast –0.4%, Previous 1.7% at 19:00