The S&P 500 Index (US500) and the Dow Jones Index (US30) both saw gains of 1.10% and 1.10%, respectively, at the conclusion of yesterday’s stock market. The NASDAQ Technology Index (US100) increased by 1.76% yesterday.

The US Commerce Department reports that the previous quarter’s gross domestic product (GDP) increased by 2.9%, which is higher than the 2.6% market expectation but less than the 3.2% quarter before. However, a more thorough assessment reveals indications of decreasing growth. Despite maintaining a healthy growth rate, consumer spending increased most significantly at the beginning of the fourth quarter. November and December saw a dramatic decline in retail sales. Due to the drop in commodity demand, business expenditure on equipment fell over the previous quarter and is probably going to stay low. According to futures markets, the probability of a 25 basis point increase is 95.8%, and the Fed’s overnight rate is expected to be 4.45% rather than the 5.1% rate previously predicted by Fed policymakers. 

Although US durable goods orders increased by 5.6%, a more thorough study revealed that company investment had dropped for four months. According to some metrics, the US manufacturing sector is already in a recession. In reaction to the delay in new orders, they have reduced production, and if the economy worsens, further reductions may be made. Recent deterioration has been mostly attributed to rising interest rates. Consumer spending and company investment are being held back by higher borrowing prices.

186,000 initial US unemployment claims were made, which was less than the 203,000 expected. Despite recent job cuts by some large IT companies, the US labor market is still strong.

Michael Burry, a well-known investor and hedge fund manager for Scion Asset Management, claims that the stock market’s present expansion is an illusion and that really challenging times are coming. The period between September 2000 and early 2003 (the dot-com bubble phase and the aftermath of 9/11) is compared by the investor. The S&P 500 Index saw gains in both September 2001 and April 2002. But after that, there was a four-month drop.

Yesterday, most European stock markets were up. The British FTSEv100 (UK100) rose by 0.21%, the Spanish IBEX 35 (ES35) increased by 0.87%, the French CAC 40 (FR40) added 0.74%, and the German DAX (DE30) increased by 0.34%.

Markets expect the ECB will stop raising rates in the second quarter of 2023 if the deposit rate reaches 3.25%, according to a Reuters poll released this week. Despite the fact that some economists are certain the ECB will raise the rate to 4% by the summer, after which it will halt.

Gold’s upward trend is still present. Another new seven-month high was reached yesterday, close to the 1950 level. The dollar index and the yields on US government bonds are inversely correlated with gold. Precious metal prices are positively impacted by the decline in US yields as the Fed approaches a potential policy change.

As China, the world’s largest oil importer, reopened its economy, oil prices increased by around 2% in response to encouraging US economic indicators and predictions of increased global demand. The oil cartel is anticipated to confirm the existing levels of output at its meeting on February 1; this could lead to further price increases. But despite the fact that interest rates are already high, an unsustainable rise in oil prices could trigger a fresh round of inflationary pressure. Therefore, the current increase in oil prices is bad for the world economy.

Yesterday’s trading on Asian markets was devoid of any trends. The Nikkei 225 index in Japan (JP225) fell by 0.12%, and the FTSE China A50 index (CHA50) was not trading. The Hang Seng (HK50) in Hong Kong increased by 2.37%, the NIFTY 50 (IND50) in India went down by 1.25%, and the S&P/ASX 200 (AU200) in Australia did not trade yesterday due to Australia Day. Most Asian markets rose again on Friday as stronger-than-anticipated economic growth figures encouraged a willingness to take risks.

The core consumer price index for Tokyo rose from 3.9% to 4.3% during the past 12 months. The inflation rate is at its highest level in 41 years. This measure is regarded as a national leading indicator of inflation. The bank’s ultra-soft approach is likely to end eventually due to rising inflation in the nation, but traders are skeptical of when such a change would take place, clouding the outlook for Japanese stocks.

S&P 500 (F) (US500) 4,060.43 +44.21 (+1.10%)

Dow Jones (US30) 33,949.41 +205.57 (+0.61%)

DAX (DE40) 15,132.85 +51.21 (+0.34%)

FTSE 100 (UK100) 7,761.11 +16.24 (+0.21%)

USD Index 101.82 +0.18 (+0.18%)