IG Morning Call

MongiIG · January 13, 2023

Stock markets have reacted positively to further signs of a slowdown in US inflation, while the dollar continued to fall back. Asian stocks pushed to a third day of gains and to new seven-month highs, while USD/JPY dropped below Y130. The IMF said that it was not likely to cut its growth outlook for the year, holding on to the 2.7% forecast due to strong labour markets and the lack of an oil price strike. Today sees the 'official' start of earnings season, with banks taking their traditional place at the head of the parade. Reporting season will dominate the news for the next few weeks, at least until the big names are out of the way. UK GDP shrank by 0.3% for the three months to December, a slight improvement on the 0.4% drop for the 3-months to November.

MongiIG · January 16, 2023

Asian stocks held steady as the new week began, but a holiday in the US means that overall market activity will remain circumscribed. Japanese stocks came under pressure as investors looked towards the next Bank of Japan meeting, worrying that the bank may look to scale back some of its stimulus efforts even as it fights a wave of selling by bond investors which has driven up yields. Earnings season gathers pace during the coming week, as more banks release their reports, while other sectors such as tech and airlines move into focus. With US markets closed today the main event will be a speech by BoE governor Andrew Bailey, at 3pm this afternoon.

MongiIG · January 17, 2023

Asian markets wobbled after Chinese GDP data pointed towards a weaker 2022 performance, but European futures have steadied as US markets return following their Martin Luther King Day holiday. While China's 2022 growth of 3% was above forecasts, it was still well below the government's expected 5.5% from the beginning of the year and then 8.1% of 2021. The return of US markets also marks the resumption of earnings season after yesterday's hiatus, as Goldman Sachs and Morgan Stanley release figures. Overall risk appetite seems to be holding steady for equities, with European markets still looking for fresh gains. The dollar has seen some strengthening over the past day, while the gains in oil prices have stalled. UK data showed that the jobless rate held at 3.7% for November, while average hourly earnings rose 6.4%. Aside from corporate earnings, key data today include the German ZEW reading.

MongiIG · January 18, 2023

A falling yen pushed the Nikkei higher overnight, up 2.5%, the standout performer in the Asian session, after the Bank of Japan held its ground on monetary policy. While GDP forecasts were trimmed and CPI expectations boosted a little, the bank will continue to buy bonds in the amounts needed to maintain its yield target for ten-year Japanese government bonds at 0%. US futures have steadied following sharp losses for the Dow yesterday in the wake of Goldman Sach's disappointing numbers, which combined weaker revenues with rising costs. UK economic data takes centre stage for the second morning running, as prices rose by a slower pace in December for a second successive month, up 10.5% versus 10.7%. But core CPI was stronger on both the yearly and monthly figures, suggesting price growth continues to move into the broader economy.

MongiIG · January 19, 2023

Another drop for the Dow yesterday on the back of poor US retail sales and manufacturing data from December carried over into the Asian session, with the Nikkei down sharply for another day. This growing sense of caution around the US economy has given bonds a lift, and even hopes that the Fed will only raise rates by 25bps at its February decision have failed to provide much support to risk appetite. US earnings season rumbles on, with a broadening out of coverage as American Airlines and Netflix report earnings. The latter, widely-viewed as the start of the period of tech earnings, is in focus as consumers cut back spending on streaming services.

MongiIG · January 20, 2023

The final session of the week in Asia saw stocks make cautious progress, while the US dollar continued to hover at levels last seen in May. Stock markets have seen upward momentum stall this week, after a good run to start the year for many European and Asian markets. US indices have not been so strong however, and with Fed officials continuing to talk about the need to maintain higher interest rates, risk appetite has been hit hard. In particular, vice-chair Lael Brainard's comments about keeping policy restrictive will have come as a surprise, given her previous dovish stance. Oil prices haves shrugged off some mid-week weakness, as hopes of demand from China bolster sentiment. In earnings, Netflix beat subscriber forecasts, and solid margins for the quarter resulted in the stock rallying 7% after hours. Today sees the release of existing home sales data plus figures from Schlumberger.

MongiIG · January 23, 2023

The week began quietly in Asia as a number of markets were closed for the Lunar New Year holiday. However, the Nikkei made fresh headway while the ASX 200 edged up with a 0.1% rise. Stocks had closed out a difficult week on Friday in a more optimistic tone, and while US futures are under pressure slightly, European markets look more positive. Earnings season is now in full swing, but today marks a lull before a busy period including names like Microsoft, Tesla and Boeing. Oil prices have enjoyed a strong run over the past week, boosted by China's reopening and hopes of stronger demand in that economy, but investors remain on watch for signs that the US economy is weakening, particularly ahead of the Fed's rate decision next week. This is expected to see an increase of 25bps, a marked slowdown from the 75bps increases that took place in 2022.

MongiIG · January 24, 2023

Markets prepare for a ramp up in volatility, as a host of PMI figures across Europe and the US bring greater clarity over recent hopes of a potential soft-landing. Overnight manufacturing PMI data out of Japan failed to budge, with expectations of a recovery of sorts failing to emerge this time around. Meanwhile, the German Gfk consumer climate figure did show signs of strength, rising to a six-month high. Aside from PMI data, keep an eye out for US earnings, with Microsoft likely to garner the most attention given the recent tech layoffs and their multi-billion investment in OpenAI.

MongiIG · January 25, 2023

Chinese markets remain closed for the new year holiday, and other indices struggled to make headway in Asia overnight, as earnings from Microsoft and others provided little reason for optimism. Revenue growth at the tech giant slowed dramatically, to its weakest level in more than five years, and was accompanied by a decidedly cautious outlook. Australian CPI came above expectations for Q4, accelerating to 1.9% over the quarter and 8.4% compared to a year earlier. Today sees the Bank of Canada release its latest rate decision, and in a harbinger of next week, the bank, the first to go for the totemic 100bps rise, will slow its tightening to just 25bps. This is the same as is expected of the Fed next week. Tesla, Boeing and IBM all report earnings today, keeping the focus squarely on earnings season.

MongiIG · January 27, 2023

Asian markets have enjoyed another good session, and have been able to extend their run higher to a fifth week for the overall MSCI Asia Pacific index. US tech earnings and hopes of renewed Chinese growth have supported trading over the past week, shrugging off some concerns about the outlook from Microsoft. In addition, stronger US growth for the fourth quarter of 2022 helped support sentiment. Today sees a quieter session all round, with only the US PCE price index and pending home sales, plus earnings from American Express and Chevron, on the calendar. The PCE index is the Fed's preferred measure of inflation, but despite this its market impact is limited as investors keep their focus on the monthly CPI figures.

MongiIG · January 30, 2023

Most Asian stock indices were little changed on Monday following gains in European and US markets last week as investors are refocusing their minds on interest rates with the US Federal Reserve (Fed) expected to hike its rates by 25 basis points and the European Central Bank (ECB) and Bank of England (BoE) by 50 basis points this week. Major global stock indices are expected to end January higher amid slowing inflation, weakening economic data and mixed corporate earnings in the US which point towards a slower pace of central bank policy tightening. After slow start with German preliminary GDP and Spanish CPI data on Monday, US corporate giants such as Apple, Alphabet, Amazon, Meta Platforms and Exxon Mobil are expected to report earnings later this week.

MongiIG · January 31, 2023

Asian markets registered small losses overnight as investors turned increasingly cautious ahead of this week's crop of big events. Despite the rally in risk assets since October, sentiment remains fragile thanks to ongoing recession fears, with an elevated risk of a short-term pullback at least should the overall view gleaned from this week's events turn out to be a negative one. Both the manufacturing and non-manufacturing Chinese PMI readings moved back into expansion territory for December, reflecting the reopening of the economy and providing sentiment with some near-term support.

Fears of ongoing high inflation readings have subsided thanks to the slump in gas prices and falling oil prices, with the latter hit yesterday by signs of strong Russian exports and concerns that OPEC+ will leave output levels unchanged. In earnings reports, today sees AMD, McDonald's and Exxon release earnings, while we also get German and eurozone GDP, plus US consumer confidence. The expected German inflation data has been moved back to next week due to 'technical issues'.

MongiIG · February 1, 2023

Investors are bracing themselves for a busy three-day period ahead. Today's big event will be the Fed decision, at which a 25bps hike is expected, though we also have the monthly ADP private payroll report at 1.15pm. From there the action intensifies, with two more central banks tomorrow lunchtime, followed up by a trio of big tech earnings after the bell, and then the monthly US jobs report on Friday. The Fed's move will be the smallest in ten months, and marks a distinct slowdown from its aggressive tightening of late last year, but we are not yet at a point where the Fed feels a pause in rate hikes is appropriate. An air of caution hangs over markets, unsurprisingly, with the next few sessions likely to be a major determinant in whether the rally in stocks continue, and whether the dollar's retreat from last year's highs will intensify. Also on the calendar today is the earnings release from social media giant Meta, which has seen its stock price fall precipitously over the past year.

MongiIG · February 2, 2023

Stock markets have been given a new lease of life it seems, as the Fed seems to hint that disinflation is now on the cards in the US. Risk appetite rebounded as Jerome Powell deployed this new word several times in his comments, which came even as the Fed stressed that more hikes would be needed. Now the focus shifts to the action-packed day before us. First up is the BoE, where another rate hike is expected, even as the UK economy stares a recession in the face. Then comes the ECB, which is also forecast to boost rates by 50bps. After all this, and hard on the heels of Meta's well-received earnings last night, comes the trio of earnings from Apple, Amazon and Alphabet. It promises to be a busy day.

MongiIG · February 6, 2023

Asian equities suffered their worst day in three months overnight, retreating on a broad front as markets reacted to the impressive US NFP reading last week. The huge number of jobs created, and the lowest unemployment level in over half a century poured cold water on the idea that the Fed would pause its hiking efforts, although expectations for the terminal rate only ticked up to 5% from 4.9%. In the UK the FTSE 100 remains close to its new record high, continuing its strong run versus other indices. Oil prices have edged higher after hitting a four-week low on Friday in the wake of the NFP report, but this appears to be a brief respite. A quiet start to the week sees just the Canadian Ivey PMI on the calendar of notable events.

MongiIG · February 7, 2023

After Monday's losses, stocks have stabilised, with most markets in Asia able to clock up small gains. A notable exception was the ASX 200, which fell 0.5% following the RBA's decision to raise rates by 25bps. This was the ninth hike in a row, and any hopes of a pause were dimmed as the bank noted that more tightening might be necessary. A quieter week on the earnings and corporate data from means that investors are back to focusing on what the Fed might do from here - Friday's jobs data set the cat amongst the pigeons on this, and now markets are pricing a Fed funds rate that is slightly higher than was the case last week, while cuts are now not expected until the opening months of 2024.

MongiIG · February 8, 2023

A late rally in the US has put some fight back into equities, pointing to a positive open for European stocks after an indecisive session yesterday. Jerome Powell reiterated the need for more rate hikes, without walking back any of his comments on disinflation at last week's Fed meeting, leaving the dollar a touch weaker. After the hurly-burly of last week's action-packed sessions, this week is quiet by comparison, with little major data out today aside from weekly crude oil inventories, plus earnings from Disney and Uber.

MongiIG · February 9, 2023

Asian markets followed the US lead and moved lower, as Fed speakers continued to dutifully follow Jerome Powell in reiterating the need for more rate increases. However, a more optimistic tone may prevail in Europe on the open, helped along by an upgraded forecast on Chinese growth from Barclays. A slip-up from Alphabet's new chatbot Bard meant that shares in the search giant fell sharply, dragging the S&P 500 lower, while Disney soared after earnings, though a promise to cut 7000 jobs reinforces the growing trend of layoffs in corporate America. Another quiet day lies ahead, with just weekly jobless claims on the calendar.

MongiIG · February 10, 2023

Stocks came under pressure again overnight in Asia, matching the cautious mood seen in the US yesterday. The MSCI Asia Pacific index fell almost 1%, though the Nikkei managed to eke out a small gain thanks to earnings updates. The market's focus is turning once again to US inflation data, the next big event on the calendar, which comes in next Tuesday. Markets have been reacting negatively to hawkish Fed speak this week, which came after a relatively uneventful appearance from Powell that seemed to calm things after last Friday's blowout payroll numbers. Thus the market is now anxiously watching to see if CPI comes in hot, a result that will likely hit equities hard and give the dollar a boost. Chinese CPI growth rose by less than expected overnight, while PPI was weaker than forecast as well. UK GDP was flat in Q4 compared to Q3, and rose 0.4% year-on-year. Canadian employment figures and the Michigan confidence index round off the week.

MongiIG · February 13, 2023

European markets are expected to kick off the week on a more stable footing today, coming off the back of Friday’s strong declines. Asian markets have provided a mixed tone, as declines in Japan and Hong Kong and Australia were counteracted by Chinese strength. Volatility promises to be a key element of the week ahead, although todays largely empty economic and corporate calendar brings the potential for a more subdued start to proceedings. However, with Tuesday bringing US inflation and UK jobs, followed by UK inflation on Wednesday, we could soon see volatility ramp up if either CPI figure runs hot. There is a chance of hesitation today given the gravity of the impending economic releases due over the coming days.

MongiIG · February 14, 2023

Asian markets made gains last night, after European and US indices made headway yesterday. Geopolitical tensions over the recent US balloon shootdowns were eased somewhat by news that the US Secretary of State was considering meeting a key Chinese diplomat in Munich this week. Futures in Europe and the US have slowed their advance as thoughts turn to today's US CPI reading, the key event of the month. Monthly inflation is expected to pick up slightly, while the year-on-year increase continues to slow, leaving markets in a quandary. A much sharper increase on January could well see the dollar rise rapidly and stocks fall back, as expectations for the Fed's terminal rate are revised higher. Conversely, should inflation growth surprise by weakening from January then investors should be on the lookout for a further fall in the dollar and some upside in stocks, following on from yesterday's gains.

MongiIG · February 15, 2023

A more cautious tone has descended across markets, as policymakers warn that global rates will have to keep rising to fight inflation. US CPI data yesterday came broadly in line with forecasts, but the slightly stronger annual rate unnerved investors. US rates are expected to remain elevated into the end of the year, with a sense of disappointment building among investors that no Fed rate cuts seem likely this year. In this scenario, we can expect further dollar strength and some pressure on equity markets. UK inflation actually fell in January, while the year-on-year figure showed further slowing growth, providing some hope of an easing of pressure on consumers.

MongiIG · February 16, 2023

Risk appetite seems to have taken the sharpest increase in US retail sales in almost two years in an optimistic fashion, hoping that it leads to better earnings rather than fretting about higher rates. Stocks in Asia moved up overnight, with the MSCI Asia ex-Japan up over 1.5%, its best move in over four weeks. European futures are pointing higher as well, with the FTSE 100 poised to open above 8000 after it clocked up a new record high yesterday.