Fed Forward
The Federal Reserve and the Bank of England gear up for their first meetings of the year, taking the reins from the ECB and the Bank of Japan. The Fed, anticipated to keep rates unchanged during its Jan. 30-31 meeting, will be closely watched for any signals on when it plans to trim borrowing costs after an unprecedented tightening campaign. Although investors still predict rate cuts later this year, stronger-than-expected data and pushback from policymakers have weakened sentiments for an early rate move in the first quarter. Market participants will also focus on the U.S. Treasury’s quarterly refunding announcements and the release of the closely-followed non-farm payrolls report.
Sinking Feeling
The release of China’s official purchasing managers’ index (PMI) data will shed light on the state of the world’s second-largest economy. Calls for more stimulus measures to bolster the post-pandemic recovery have thus far brought only limited rescue packages, leaving doubts about the sustainability of China’s growth. Additionally, PMI figures from South Korea, Thailand, and India will be closely scrutinized.
Megacaps on Parade
This week, attention turns to a flurry of U.S. corporate results, with the spotlight on megacap tech and growth companies. Apple, Microsoft, Alphabet, Amazon, and Meta Platforms, collectively known as the “Magnificent Seven,” have all played a crucial role in driving the S&P 500 to record highs. The market will keenly observe whether these companies can sustain their momentum and whether the S&P 500 can maintain its bull market status. Investors are particularly interested in fourth-quarter earnings, with S&P 500 companies expected to post a 4.5% rise compared to the same period last year. The focus also shifts to whether corporate earnings will continue to grow in 2024 as anticipated. BBVA, Santander, Deutsche Bank, BNP Paribas, and UniCredit will also report their full-year results.
Banking Sector and Inflation Data
The banking sector and the broader market eagerly await the eurozone’s Q4 GDP numbers and flash January inflation data. These figures will provide insights into the possibility of upcoming ECB rate cuts. With the ECB expected to reduce rates this year, investors will gauge the impact on banks’ loan quality and whether the higher interest rate environment is affecting their ability to maintain generous buybacks and dividends.
(Source: Adapted from Reuters)