Tuesday, January 31, 2023

Fundamental Analysis of European and United States Stock Markets for December 7, 2022

European stock markets and, above all, American ones, lost yesterday along with Wall Street’s main index, the S&P 500, thus following four consecutive sessions of losses. Behind this negative behavior is investors’ fear that, given the strength shown by the labor market and the US services sector, the Federal Reserve (Fed) will be forced to raise its official interest rates above what the markets expect – the current terminal rate. The U.S. is placed in the range of 4.6% to 5.0% by analysts – it is possible that this economy will have to force a “hard landing” to bring inflation down to the two% target.

However forecasts continue to point to the fact that the Fed, at its monetary policy meeting next week, will slow down the pace of its rate hikes, raising them by “only” 50 basis points – it has raised them by 75 basis points. extended to. Four consecutive meetings—something US central bank chairman Jerome Powell came to confirm last week—is likely to see the Fed start to backtrack part of the path next year and finally begin the process of lowering rates. year is progressing. remote time. The problem is that many investors have bet on this scenario and are now skeptical that it is possible.

In addition, another factor that has buoyed equity markets in recent weeks: the shift in strategy to combat COVID-19 that Chinese authorities are gradually adopting, opening up the economy faster than expected. Will start To lose “your influence”, which has also had a negative impact on the behavior of Western stock markets in recent days.

While it is true that the way China has dealt with the pandemic has changed significantly in recent weeks, mainly due to discontent among the population, discontent that has generated riots and demonstrations in a country where they do not usually occur As everything is under the control of the Communist Party, it is also true that the limitations of the Chinese health system make things very complicated and are going to slow down the aforementioned reopening process, something that investors are starting to appreciate. Huh.

Finally, there’s the “technical” factor. Following the strong rally experienced by western stock markets over the past two months, many stocks and indices have reached significant overbought levels, so it should not be surprising to see some active price correction before continuing the recovery on the ground. There are ,

In this sense, we continue to stress that, at least until next week, when it becomes known what the main Western central banks are planning to do in terms of monetary policy – remember that the Fed’s Monetary policy committees are meeting with the ECB. and Bank of England (BOE) – European and US stock markets will remain stable with indices moving in a narrow price range, consolidating their recent gains. We expect that, once the intentions of the central banks are known, the western equity markets will follow the trend which may be set for the end of the year.

Calendar and Predictions for December 7, 2022

With regard to today’s session, it should be noted that we expect another day of little activity, with the main European indices opening mixed and/or slightly higher, with many investors waiting for events, markets built on margin Will remain

New measures announced this morning in China, aimed at greater flexibility to combat COVID-19, are likely, but not certain, to stimulate prices of European companies most exposed to the Chinese market. For. However, and for the time being, that economy is slowing, as confirmed by export and import data this morning, which fell sharply in November, even more than analysts had anticipated.

For the rest, note that on TODAY’s macroeconomic agenda, the publication of the final reading of GDP for 3Q2022 and industrial production in Germany for October in the Eurozone differ. In addition, and already in the afternoon and in the US, final readings for 3Q2022 of productivity and unit labor costs will be released. However, we do not believe that any of these figures have the “ability” to “move” the markets.

This article was written by Juan Jose Fernandez Figueres for LinkSecurities.

To see all the economic events of the day, we recommend that you visit our Economic Calendar.

Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
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