Equity markets are off to a strong start on Thursday, buoyed, it seems, by the Fed’s latest decision and Meta Platforms (NASDAQ:META) earnings.
While Powell was determined not to overplay the shift in the Fed’s views on inflation and interest rates, certain comments were well-received by the markets. The acceptance that the disinflation process has begun is one obvious comment. However, this was also paired with his stressing that they need substantially more evidence and to hike a couple more times before monetary policy is appropriately restrictive.
All things considered, I think there was enough there to conclude we’re almost at an end on tightening, and market expectations of one more 25 basis point hike and maybe a couple of cuts later in the year look reasonable. Of course, plenty of data will come before the next meeting in March, so that a lot could change in that time.
What Will the ECB and BoE Deliver?
Now it’s over to the ECB and BoE to deliver their decisions, both of which are expected to be 50 basis point hikes. But what comes next is the key question in both cases. The BoE is hiking the UK economy into recession, but inflation remains stubbornly very high. The ECB was very late to the party and has some catching up to do, while the economic backdrop looks a little better than it did in December.
The BoE decision is also accompanied by a press conference with Governor Andrew Bailey and his colleagues, as well as the latest monetary policy report and new projections. That should make this event very interesting, as we’ll get a better insight into how effective the MPC believes past hikes have been when we see the results and how much more they think are necessary.
Can Big Tech Follow in Meta’s Footsteps?
The earnings season has been tough so far this quarter. Still, Meta managed to put a smile on investors’ faces, announcing slightly better revenues than expected, a plan to reduce costs and make the company more efficient this year, and a $40 billion share buyback.
That has seen the share price rise almost 20% in premarket, and Nasdaq 100 Futures to rise more than 1%. The question now is can Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and others deliver similar results today?
Oil Drifts Lower
Oil prices drifted lower again on Wednesday on the back of weaker manufacturing activity data from the US and a strong build in the EIA inventory data. Prices have declined over the last week or so as investors have become less confident in the strength of the outlook, something we could see change repeatedly in this first quarter due to the lack of visibility on the interest rates and China’s Covid transition.
Gold Liked What Powell Had to Say
Gold was clearly buoyed by what the Fed and its Chairman had to say, with the price rallying back above $1,950 and out of its recent range. It’s now trading around $1,955, the one concern being the weak momentum backing it. That could change, of course, but it likely faces strong resistance on an approach to $2,000, with $1,975 being an interesting test last time around.
Bitcoin: Major Resistance Ahead
Bitcoin has done very well in a much-improved risk environment this year and has taken another step in the right direction over the last 24 hours, hitting a new 6-month high in the process. It now faces significant resistance around $24,500-$25,500, a break of which could give it a massive psychological lift.