Last week's ups and downs in international markets, with Fed officials building momentum for a March rate hike and the lack of progress in the U.S.-Russia dialogue helped international oil prices rise to two-month highs.
U.S. stocks continued their correction, with the Dow down 0.9 percent weekly and the Nasdaq and S&P 500 down 0.3 percent weekly. Europe's three major stock indexes rose and fell, with the UK FTSE 100 up 0.8% weekly, germany's DAX 30 down 0.4% weekly, and France's CAC 40 down 1.1% weekly.
The 2022 World Economic Forum Annual Meeting, scheduled for January in Davos, Switzerland, will be held online from January 17 to 21 and will focus on key challenges in four key areas, including global climate issues, post-pandemic recovery, economic and social resilience and global cooperation.
The U.S. stock market and the U.S. treasury market were closed for one day on the 17th due to the anniversary of "Martin Luther King Jr." This week, many central banks will announce interest rate decisions, the Bank of Japan is expected to maintain its ultra-loose policy at the meeting on Tuesday; Norway, Indonesia's central bank is expected to remain on hold; the Hungarian central bank or continue to raise interest rates, Turkey's central bank facing pressure from President Erdogan There is a possibility of continuous interest rate cuts; the European Central Bank, the Bank of England released the minutes of the meeting, and Bank of England Governor Bailey will speak on the Finance Committee of the British Parliament. The United Kingdom, Germany and the Eurozone update the Consumer Price Index (CPI) for December last year. OPEC released a monthly report, and star stocks such as Goldman Sachs, Morgan Stanley, and Netflix will release results.
The epidemic may continue to disturb the manufacturing industry
Fed Chairman Jerome Powell attended the nomination hearing last week. He said the Fed would take steps to ensure that the high inflation that has emerged over the past year does not take root in the economy. Several Fed officials also hinted in subsequent speeches the possibility of accelerated policy tightening, with federal funds rate futures now showing a nearly 90% chance of a rate hike in March, with the 10-year Treasury yield trading near 1.8%.
Vacancies within the Fed are expected to be filled soon. U.S. President Joe Biden nominated former Fed Governor Sarah Bloom Raskin as the Fed's vice chairman of financial regulation to succeed the outgoing Randal Quarles. Ruskin's nomination will need to be approved by the U.S. Senate, and if she is finally in office, she is expected to push for policies on thorny issues, including financial risks posed by climate change, community lending rules and fintech companies, and may consider several rule changes to Quares that involve rules on speculative bank investments, derivatives trading, liquidity and capital.
Among other things, Biden nominated Lisa Cook, a professor of economics and international relations at Michigan State University, and Philip Jefferson, a professor at Davidson College in North Carolina, to fill the remaining two Fed board seats. Both economists, both of whom are African-American, help Biden deliver on his promise to improve diversification at the Fed's top management.
In terms of data, the New York Fed manufacturing industry (PMI) is expected to be under pressure this week due to supply chain bottlenecks and epidemic factors. Real estate data may fall slightly, and the recent shock in high house prices and mortgage interest rates is expected to pose a resistance to new housing starts and complete home sales. After a slight rebound in initial jobless claims in the previous week, it is interesting to watch whether the Olmikron strain will cause a further blow to the job market.
The earnings season enters the second week, and the six major banks will disclose results of Goldman Sachs, Bank of America and Morgan Stanley, in addition to Procter & Gamble, United Health, United Airlines earnings reports are also worth paying attention to. Netflix will be the first major tech stock to report results, and the streaming giant just raised monthly subscription fees in the United States and Canada on Friday. This is Netflix's first price increase in the domestic market since the end of 2020.
Crude oil and gold
International oil prices rose for the fourth consecutive week, traders remained optimistic about the demand outlook, and oil prices were boosted by the continuation of tensions between Russia and Ukraine. The WTI crude near-month contract closed at $83.82 a barrel, up 6.2% weekly, and brent crude oil near-month contract closed at $86.06 a barrel, up 5.3% weekly.
The situation in Ukraine has exacerbated recent european energy price volatility. Phil Flynn, senior market analyst at Price Futures Group, said: "From an energy market perspective, Russia is not only a major oil producer, but Europe, eager to get rid of fossil fuels, has become increasingly dependent on Russia as its main source of energy. ”
"Fundamentally, market demand remains strong because OPEC is not in a hurry to rush into the market. Technically, oil prices have built a solid foundation in the range of $79 to $80 and are expected to hit $85 further. Peter Cardillo, chief market economist at Spartan Capital Securities, said in a note.
International gold prices were supported by weaker U.S. dollar movements, marking their best weekly performance since November. COMEX gold futures for February delivery on the New York Mercantile Exchange closed at $1816.50 an ounce, up 1.1% weekly.
Investors are gearing up for tighter U.S. monetary policy in the coming months and are concerned about the effectiveness of central banks in curbing inflation. Jeff Klearman, portfolio manager at GraniteShares, noted that while the high consumer price index and producer price index have boosted market expectations for more aggressiveness, there is a fundamental sentiment that the Fed will continue to proceed cautiously. Long-term real interest rates are struggling to come out of negative territory, which is also supporting gold prices.
Inflation in Europe remains high
Eurostat data released last week showed a total foreign trade deficit of 8.3 billion euros in the 27 eu in November 2021, the first time since January 2014 that the EU had a monthly trade deficit, compared with a surplus of 24.5 billion euros in the same period last year. The data showed that the EU's imports in November last year increased by 32.0% year-on-year, far exceeding the growth rate of exports of 14.4%.
The pandemic continues to pose a threat to the European economy. The German Federal Statistical Office expects Germany's economy to grow by 2.7 percent in 2021, which is lower than expected. According to the Confederation of German Industries, the supply chain bottleneck problem is the main reason why the German economy is growing slower than expected. Many companies in the country's automotive, electrical and mechanical engineering industries have been affected by supply chain bottlenecks that have slowed the process of industrial recovery, with losses estimated at around €50 billion. In addition, the lack of chips, components and raw materials will continue to hinder the recovery of production for a long time.
This week, the eurozone, Germany and Italy will release the final value of the consumer price index (CPI) in December last year, and inflation in the euro area and Germany is expected to remain above 5%. ECB President Christine Lagarde said last week that eurozone inflation would retreat from this year's record highs and that the ECB was prepared to do whatever was necessary to reduce it to its 2% target. "We can respond flexibly to a range of situations where the drivers of inflation are actually a drag on growth. Rising energy prices are cutting household incomes and weakening confidence, while supply bottlenecks are leading to manufacturing shortages. She said.
The UK's gross domestic product (GDP) grew by 0.9% month-on-month in November 2021, and for the first time, the size of the economy exceeded pre-COVID-19 levels, up 0.7% from February 2020. This week, the UK will release key figures such as the unemployment rate, inflation and retail sales monthly. Bank of England Governor Pele, who will speak on the Uk Parliament's Finance Committee on Wednesday, could follow the latest clues about the economy and the path to rate hikes.
Monex currency analyst Simon Harvey said the GDP data would serve as the first confirmation point to allow the Bank of England to raise rates again in February. Next week's data is expected to drive rate hike expectations as well as short-term gilt yields. The outbreak does not appear to have had a significant impact on the UK economy, which is expected to raise interest rates three or four times this year.
Highlights for the week
