But the most relevant aspect of the meeting will be what the Fed says about its future intentions on matters of interest rates, something that will be directly linked to its members’ expectation about the future behavior of inflation. If the Fed is satisfied with the recent behavior of this variable and is confident that it will be able to achieve a soft landing for the US economy, then the markets, which have been discounting this scenario, will celebrate it with new increases. Conversely, if the Fed indicates that there is still a lot of work to be done to control high inflation, we could see a correction in western stock markets.
But equally important will be the meetings that will be held on Thursday by both the Bank of England’s Monetary Policy Committee (BOE) and the ECB’s Governing Council. In theory, both organizations are expected to raise their official interest rates again by 50 basis points, although at the moment the economies of the United Kingdom and the eurozone are already in recession and the other is showing more Is. resistance than originally anticipated.
However, in both sectors, inflation, especially core inflation, has been reluctant to ease, which may lead to messages from both central banks, especially from the ECB, that given the strong economy, it has more investors to buy. Margin may not like it. This maneuver, as it is, is still somewhat “aggressive” in terms of withdrawing monetary stimuli. If so, it is also possible that they will trigger a selloff in some European stock markets, markets that have moved up a lot in a short period of time and are technically overbought.
The week also presents an in-depth macro agenda, in which we will highlight the publication of January’s final readings of key activity indices for the manufacturing sectors (Wednesday) and services (Friday) in the Eurozone, the United Kingdom and the US. , PMI and US ISM, indices that will help us establish the moment that the private sector is passing through in each of these areas.
Similarly, the publication of non-agricultural employment data for the month of January in the US on Friday will be very relevant. The US labor market, like the British and Eurozone, is very tense despite the Fed’s “attempts” to ease it, hence the relevance of these data for future performance of the US central bank.
While investors will learn more about the Fed’s interest rate intentions on Friday, we understand that these will be largely tied to the behavior of the labor market in the months ahead, hence the significance of the above employment data.
Finally, it should be noted that the season for publishing quarterly business results in both the main European stock markets and on Wall Street will reach a “cruising pace” this week. Thus, the remaining banks integrated in the Ibex-35 will publish their data on the Spanish stock market in the coming days – Bankinter (BKT) and Sabadell (SAB) have already done so-, Unicaja (UNI) announced them yesterday, BBVA on Wednesdays, Santander (SAN) on Thursdays and CaixaBank (CABK) on Fridays. Among the companies that publish their figures on the rest of the European stock markets, we will highlight the pharmaceutical companies Roche (ROG-CH), Novartis (NOVN-CH) and Sanofi (SAN-FP), as well as the oil company. Shell (SHEL-NL) and UBS Bank (UBSG-CH).
On Wall Street, for their part, nearly 100 components of the S&P 500 will announce their figures, among which we’ll highlight four big technology companies: Amazon (AMZN-US), Apple (AAPL-US), Alphabet (GOOGL-US) ) and Meta Platforms (Meta-US). In addition, oil company Exxon Mobil (XOM-US), Starbucks (SBUX-US) and pharmaceutical company Merck (MRK-US) will do so, among other companies. So far, the season’s results have been somewhat weaker than expected, especially on Wall Street, and that analysts had set the bar too low.
At this point in time, and as we expected, investors are placing more importance on what companies say about the future of their businesses (the future) than on what they reveal from the past quarter (the past). . In general, the tone of managers at these companies tends to be conservative, a result of the still many uncertainties that face their businesses.