Juan J. Fdez-Figares (Link Securities) | In a session that we want to indicate as transitions, the main European and US stock indexes closed yesterday mixed, without major changes and, indeed, far from the highest levels of the day. The day in Europe started with the “disappointment” that for many investors the publication of the Chinese communist economic growth target for 2023 can be initially positioned as conservative (+5%) for rural investors. In addition, this growth will be primarily based on boosting private consumption and not so much on infrastructure investment, as has been the case in China. This means that, if confirmed, in many countries the economic recovery in China will have less of a positive impact than initially expected.
This was evident yesterday in the behavior of some sectors, especially those related to crude mineral materials, which drag the indices throughout the day.
However, since bond prices started the day with a rise, while yields fell slightly, they allowed the main indexes in the region to open the day with substantial gains, the gains gradually moderated. The publication of the investment sentiment index in the Eurozone, in March, provided by Sentix, had something to do with this, as it fell for the first time in five months in relation to the previous month. In this sense, it should be noted among the conclusions of the study that investors i) begin to doubt the strength of the economic recovery in the Eurozone and ii) begin to look again for the evolution of prices. in the country, that is, it is not clear that they will “win” in the fight against inflation.
On Wall Street, yesterday’s session also went from plus to minus, as the bond returns “peace” for the stock market. Thus, at the beginning of the day on Friday, it orders to recover, the bond prices to recover, which is gradually lost, which leads to what is reached at the end of the day. the yields of these goods end up at the top of the curve. Low activity, as we expected, with a significant part of the market waiting to see what Federal Reserve (H) Chairman Jerome Powell may say when he speaks this afternoon (4:00pm CET) before the Banking Committee. Since his last relevant public intervention, held after the beginning of February of the Federal Market Committee (FOMC), there are two variables that “move” in the opposite direction to what H likes. Thus, the use of data for January far exceeded what was expected by the market, which points to the lightening of the labor market and therefore inflation, since inflation picked up again in that month. It will be very interesting to see if both things are enough to change Powell’s speech or if the President reiterates that i) there is still work to be done and that, ii) from now on, he will act from the information that he knows. market behavior Conversely, if Powell is “more aggressive” and hints at a 50 basis point hike back on the table before the FOMC meeting at the end of March, both bonds and stocks will continue to pick up these proposals with falls.
I’m waiting to see what Powell says and how he says it, I’m betting we’re at a slightly higher level opening today in European stock markets. Later, and in a session that presents the lightest twist of the agenda, in which there is no issue in the publication of German factory orders in January, all the attention of investors is monopolized by the intervention of Powell in the afternoon. which will determine the trend of these bags at the end of the day. Until then, we are still waiting for a little activity in the payment market with many investors to recruit prudence, waiting to hear what Hed seats say to the senators who make up the Banking Committee of the Upper House of the United States Congress. .