Wall Street Under Pressure on Wednesday
US stocks fell on Wednesday, with investors worrying about the impact of a slowing economy on corporate profits and digesting comments from Fed Powell. The Dow Jones was down more than 100 points, and the S&P 500 retreated 0.8%. The Nasdaq underperformed and shed more than 1%, dragged by an over 7% loss by Google’s parent Alphabet Inc. as concerns lingered about rising competition in the artificial intelligence space. Also, Chipotle dropped more than 5% after quarterly results missed expectations. On the other hand, CVS and Uber surged more than 4% and 2.5%, thanks to upbeat Q4 data. Additionally, Microsoft was slightly higher after the software giant said it was updating its Edge web browser and Bing search engine with artificial intelligence. On Tuesday, Fed Chair Jerome Powell reiterated that the disinflationary process has begun, but the terminal level of the Fed funds might still be higher if robust labor data persists.
French Stocks Underperform Peers
The CAC 40 index reversed early gains to close slightly down at 7,120 on Wednesday, underperforming its regional peers, amid concerns over France's economic and social situation following nationwide protests against Macron's pension reform. Meanwhile, investors weighed the "balanced" tone from Fed's Chair Powell against more hawkish comments from other Federal Reserve officials and some ECB policymakers. Powell reinforced that rates might need to move higher if the jobs market shows no signs of cooling, although the disinflation process has begun. On the corporate front, Societe Generale slipped 5%, the most in the index, even after posting a higher-than-expected profit in the fourth quarter, followed by Saint Gobain (-4%). Also, shares in TotalEnergies fell 1.9%, after its fourth-quarter profits and revenues missed market estimates. On the opposite side, BNP Paribas (+2.4%) and Engie (+2%) advanced the most.
Italian Stocks End at Near 1-Year High
The FTSE MIB index rose about 0.2% to close at 27,161 on Wednesday, the highest in almost a year, extending gains for the third straight session. Market sentiment was boosted by upbeat corporate earnings and after Federal Reserve Chair Jerome Powell struck a less hawkish tone than feared during a speech at the Economic Club of Washington. On the domestic data front, Italy's retail sales fell in December, though less than expected. Among single stocks, Saipem was once again the top performer, advancing 5.2%, benefiting from rising crude oil prices and the update on the sale of onshore drilling assets from KCA Deutag, which announced the completion of the acquisition of the assets in Kuwait. Also, Inwit (+2.1%), Telecom Italia (+1.9%), Tenaris (+1.9%) and Eni (+1.8%) posted sharp gains. However, Banco Bpm shed 2% after Italy's third-largest bank confirmed its 2023 net earnings per share and raised its dividend for 2022 on the back of stronger-than-expected fourth-quarter results.
European Shares Gain on Earnings
European stock markets closed mostly higher on Wednesday, with the pan-European STOXX 600 gaining about 0.3% to end near last Friday's nine-month high and Germany's DAX 40 advancing 0.5% to finish above the 15,400 mark, helped by upbeat earnings reports from Finnish refiner Neste, Norway's Equinor, and Danish jewellery maker Pandora. In other corporate news, German gas giant Linde and Dutch paints maker Akzo Nobel gave higher 2023 earnings forecasts, while Norwegian fertiliser maker Yara proposed a higher-than-expected dividend. Elsewhere, investors have also weighed less hawkish than feared comments from Federal Reserve Chair Jerome Powell against hawkish remarks from ECB's Joachim Nagel. Powell reiterated overnight that the disinflation process had begun although further rate increases were still needed, while Nagel said there was a need for more big interest rate hikes to bring inflation back to the 2% target.
FTSE 100 Extends Gains, Just Shy of Records
Equities in London advanced for a second consecutive session on Wednesday, with the benchmark FTSE 100 hitting a fresh record peak but paring some gains to close around 7,880, with a rally in the technology and energy sector partly offset by losses in materials. Investors welcomed Federal Reserve Chair Jerome Powell's comments that the disinflationary process has begun, particularly in the goods sector, even as he acknowledged that rates might need to move higher than expected if the jobs market shows no signs of cooling. BT Group rallied more than 3% to lead the FTSE 100, while oil giant BP was also among the top gainers.
South African Stocks End in the Green
The JSE FTSE All Share index rose about 0.6% to close at 79,976 on Wednesday, halting two straight sessions of losses, in line with global bourses. Market sentiment was boosted by less hawkish than feared comments by US Federal Reserve Chair Jerome Powell. He said that while the "disinflationary process" has started, it will take a good deal of time before the U.S. Federal Reserve is ready to declare victory in its fight against rising price levels. Tech stocks and industrials were among the top performers. Locally, traders are shifting their focus to President Cyril Ramaphosa's State of the Nation address to parliament on Thursday, where he is expected to offer some solutions to tackle the nation's worsening power crisis.
Russia Jobless Rate Stays at Record Low, Below Expectations
Russia’s unemployment rate was at 3.7 percent in December of 2022, the same record low rate as in November and below market forecasts of 4 percent. The result was in line with previous statements from the Central Bank of Russia that the Russian military’s mobilization to fight in Ukraine exacerbated labor shortages and reduced the capacity of the Russian economy. The number of unemployed people increased by 30 thousand from a month earlier to 2.775 million people, while those officially registered as unemployed fell by 42 thousand to 0.645 million. In December 2022, the jobless rate was higher at 4.3 percent.
MOEX Falls for Second Day
Equities in Moscow dropped for a second consecutive session on Wednesday, with the ruble-based MOEX closing around 2,250 points, dragged by the chemicals sector. Investors continued to follow developments about the government proposal to tax oil producers based on Brent crude prices rather than the currently used Urals benchmark after Western sanctions pressured the latter. On top of that, the government is considering introducing a windfall tax on big companies as the country's monthly revenues from oil and gas have dropped to their lowest levels since 2020. Among single stocks, Aeroflot and Polus were among the biggest laggards, down roughly 2.5% and 1.1%, respectively.
US Natural Gas Pulls Back to Near 25-Month Low
US natural gas futures fell more than 5% to $2.45/MMBtu, the levels last seen in April 2021, dragged down by a decline in LNG exports and above-normal temperatures forecasts until February 18th. The amount of gas flowing to US LNG export plants dropped by about 1.2 bcfd over the last five days to a preliminary two-week low of 11.8 bcfd on Wednesday, mainly due to a reduction in the Sabine Pass export plant in Louisiana. Meanwhile, gas production hit a 2-week high of 97.9 bcfd on Tuesday, up from a five-week low of 93.9 bcfd last week when extreme cold froze oil and gas wells in several producing basins. On Tuesday, the US benchmark gained more than 5% on hopes that Freeport would pull in more gas in the coming weeks as the facility decided to start sending gas to one of three liquefaction trains to turn it into LNG for export.
Oil Pares Gains After EIA Data
WTI crude futures dipped below the $78 per barrel mark, moving away from their session highs of $78.5, after government data showed that US inventories increased last week, contrasting with an API report on Tuesday showing the opposite. The latest data from the EIA indicated that crude oil stocks in the US rose by 2.423 million barrels last week. Still, despite this pullback, prices remained supported by optimism about a recovery in demand. Saudi Arabia, the world's top exporter, raised crude prices for Asian markets for the first time in six months in the latest signal that demand could be poised to rebound on the likelihood of higher imports from China. On the supply side, suspended operations at a crucial oil terminal in Turkey due to the recent earthquake and an unexpected shutdown of a major oil field in Norway added to the bullish tone.
Russia Retail Sales Fall More than Expected
Retail sales in Russia slumped by 10.5% from a year earlier in December 2022, worse than market forecasts of a 9.5% fall. It marks the ninth consecutive contraction in yearly retail sales and at the fastest pace since May 2020, reflecting the country's deteriorating economic conditions due to the prolonged war in Ukraine and enduring international sanctions. On a monthly basis, retail sales jumped by 17.1% in December, the biggest rise in a year, after decreasing by 0.2% in the prior month. For the whole year of 2022, retail sales declined by 6.7%, the most since 2015.
Gasoline Futures Fall on Lower Demand
Gasoline futures fell toward $2.4 per gallon, pressured by weaker demand. According to data from the Energy Information Administration (EIA), gas demand dropped from 8.491 million to 8.428 million b/d last week. Meanwhile, total domestic gasoline stocks increased by 5.008 million bbl to 239.6 million bbl. At the same time, AAAA said that rising or falling oil prices could directly impact motorists' wallets since oil currently accounts for nearly 60% of the price pump. Last week, OPEC+'s decision to maintain current production levels and refrain from making any cuts led to lower oil prices.
Russia Real Wages Unexpectedly Rise for 2nd Month
Real wages in Russia went up by 0.3% year-on-year in November 2022, against market expectations of a 1.6% fall. It follows a 0.4% rise in October, marking the second consecutive month of mild increases in wages. Meanwhile, average nominal wages rose 12.3% from a year earlier to 63,060 roubles.
US Crude Stocks Rise for 7th Week: EIA
Stocks of crude oil in the US rose by 2.423 million barrels in the week ended February 3rd, 2023, compared with market expectations of a 2.457-million-barrel increase, the latest US Energy Information Administration report showed. Also, crude stocks at the Cushing, Oklahoma, delivery hub increased by 1.043 million barrels, following a 2.315 million build. Gasoline stocks rose by 5.008 million barrels, above forecasts of 1.271 million; and distillate stockpiles, including diesel and heating oil, advanced by 2.932 million, versus expectations of a 0.097 million increase.
Canadian Stocks Little Changed with BoC Minutes in Focus
The S&P/TSX Composite Index was little changed at the 20,740 level on Wednesday, with investors awaiting the first ever Summary of Deliberations from the Bank of Canada for further clues on the central bank's next steps. On Tuesday, Governor Macklem said no further rate hikes will be needed if, as expected, the economy stalls and inflation comes down. Energy shares were the top performers while the financial sector was the biggest laggard..
US Wholesale Inventories Growth Slows to Near 1-1/2-Year Low
Wholesale inventories in the United States went up by 0.1% from a month earlier to $932.9 billion in December 2022, in line with preliminary estimates and slowing from the 0.9% rise in the previous month. It was the smallest increase in wholesale inventories since July 2020, suggesting that businesses were scaling down their restocking efforts as demand weakens amid tighter financial conditions. Inventories rose at a slower pace for durable goods (0.9% vs 1% in November) and stocks of non-durable goods decreased (-1.2% vs 0.8%), especially for petroleum (-5.8% vs 2.2%), farm products (-3.6% vs -1.9%), apparel (-2.3% vs 2.4%) and paper (-2.3% vs -0.8%). On an annual basis, wholesale inventories rose by 17.6%, slightly below an earlier reading of 17.8%.
Baltic Exchange Dry Index Breaks 5-Day Losing Run
The Baltic Exchange's main sea freight index, which measures the cost of shipping goods worldwide, snapped its five-day losing streak on Wednesday, rising 2 points to 603 points, though holding close to the lowest since June 2020. The capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, was up for the second session, surging about 7% to 474 points, on its biggest daily percentage gain in seven weeks. Meanwhile, the panamax index, which tracks coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased 1.27% to its lowest since June 12th at 856 points; and the supramax index fell 16 points to 651 points.
Wall Street Rally Run Out of Steam
The blue-chip Dow lost 200 points on Wednesday, and the S&P 500 and Nasdaq 100 were down roughly 1.1% and 1.7%, respectively, with investors securing some profits after a Powell-induced rally while digesting a slew of earnings reports. Fed Chair Jerome Powell reiterated that the disinflationary process has begun, but if robust labor data persists, the terminal level of the Fed funds may be higher than expected. On the corporate side, Chipotle dropped almost 6% after quarterly results missed expectations. Uber surged 2% after posting better-than-expected Q4 earnings and revenue. Also, Microsoft rallied nearly 1% after the software giant said it was updating its Edge web browser and Bing search engine with artificial intelligence.
Brazilian Stocks Edge Higher
Brazil’s Ibovespa index was trading slightly higher around the 108,700 level on Wednesday, with investors keeping an eye on signals from the Federal Reserve about the direction of interest rates and on President Lula’s comments about the Central Bank of Brazil. The corporate results from domestic companies were also in focus. Shares in Itau rose more than 5%, making it one of the top gainers on Bovespa, after posting upbeat Q4 results. Petrobras will release later production and sales data for the fourth quarter and for the year 2022. In the corporate news, Lojas Americanas informed creditor banks that it should propose, by next week, a new solution to the crisis that does not involve the capitalization of the company. Meanwhile, President Lula again complained about the monetary policy conducted by the Central Bank and said that the president of the institution “owes an explanation to Congress". President Lula receives today leaders of governing parties to discuss the tax reform.
Poland Leaves Interest Rates Unchanged
The National Bank of Poland held its benchmark reference rate unchanged at 6.75% for the fifth consecutive time at its February 2023 meeting, as expected. The annual consumer inflation in the country fell for the second consecutive month to 16.6% in December, from 17.5% in November and a 26-year high of 19.5% in October. In the meantime, the Lombard rate and the deposit rate were also kept at 7.25% and 6.25%, respectively.
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