Fed and earnings lift

Equity markets are off to a strong start on Thursday, buoyed it seems by the Fed’s latest decision and 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, being one obvious comment, but this was also paired with him 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, there’s plenty of data to come before the next meeting in March so 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 meanwhile 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, indeed, as we’ll get a better insight into how effective the MPC believes past hikes have been, when we’ll see the results and how much more they think are necessary.

Can big tech follow in Meta’s footsteps?

Earnings season has been tough so far this quarter but 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 premarkets, and Nasdaq futures to rise more than 1%. The question now is can Apple, Amazon, Alphabet 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 been on the decline 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 interest rate 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 approach to $2,000, with $1,975 being an interesting test last time around.

Major resistance ahead

Bitcoin has done very well in a much improved risk environment so far this year and it 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.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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