Fed Forward
The Federal Reserve and the Bank of England are set to hold their first meetings of the year, taking over from the ECB and the Bank of Japan. The Fed is expected to keep rates unchanged, but investors are looking for clues on when the central bank will start cutting borrowing costs after an aggressive tightening cycle. While cuts are anticipated, stronger-than-expected data and pushback from policymakers have weakened confidence in a first quarter rate move. The market will also keep an eye on the US Treasury’s refunding announcements, as concerns over government debt issuance persist. Additionally, the closely-watched US non-farm payrolls report is due on Friday.
Sinking Feeling
China’s official purchasing managers’ index (PMI) data release on Wednesday may highlight the need for significant economic repair. Calls for further stimulus to enhance the post-pandemic recovery have been met with limited rescue packages, and sustaining the 5% growth target is doubtful. PMI figures from South Korea, Thailand, and India will also affect the data calendar.
Megacaps on Parade
A heavy week of US corporate results features prominent tech and growth companies. Apple, Microsoft, Alphabet, Amazon, and Meta Platforms will report, with their performance crucial for sustaining the S&P 500’s momentum. Overall, S&P 500 companies are expected to post a 4.5% rise in Q4 earnings compared to the previous year. Investors are keen to see if corporate earnings will remain positive in 2024, as estimates suggest a further increase of over 10%. Banks such as BBVA, Santander, Deutsche Bank, BNP Paribas, and UniCredit will also release full-year results, with attention on the potential impact of higher rates and the quality of their loan portfolios. Euro zone Q4 GDP numbers and flash January inflation data will provide further insights into potential ECB rate cuts.
(Graphics by Vineet Sachdev, Prinz Magtulis, Kripa Jayaram, Pasit Kongkunakornul and Riddhima Talwani; Compiled by Karin Strohecker; editing by Dhara Ranasinghe and Ros Russell)