Morning Bid: 'Soft landing' or 'no landing'?

Pentair

31/01/2023 11:00

A look at the day ahead in U.S. and global markets from Mike
Dolan
    There's an uncomfortable feeling in markets this week that
good news may be bad news once again - mainly because of what
the former means for this week's big central banking set pieces.
    As U.S. Federal Reserve's Federal Open Market Committee
kicks off its two-day policymaking meeting, the economic news
from around the world brightened considerably. 
    Possibly wary of a premature easing of financial conditions
before its tightening campaign is finished, some investors
suspect the Fed may want to hang tough for a bit longer -
stressing more needs to be done to ensure inflation is licked
even as it slows the pace of rate hikes another notch to a
quarter point rise on Wednesday.
    Another one-two of half point rate rises from the European
Central Bank and Bank of England the following day adds to the
trepidation, not least with Spain reminding everyone on Monday
that inflation rates can re-accelerate again even after peaking.
    And if global recession is avoided, the hawkishness may
persist. That's why China's new year bounce back from
COVID-lockdowns and the euro zone dodging a downturn due to
falling energy prices in a warm winter matter so much. They
account for the world's second and third biggest economic areas.
    China's economic activity swung back to growth in January
after three months of contraction, according to official
business surveys released on Tuesday.
    The euro zone economy confounded forecasts for a quarterly
contraction of gross domestic product in the final three months
of 2022. Eurostat estimated GDP in the bloc rose 0.1% in Q4
despite consensus expectations for a fall of 0.1%.
    And if the significant energy price relief of the past two
months means activity picked up further early this year, the
long-standing assumptions for a winter euro zone recession will
evaporate.
    Underlining the point, the International Monetary Fund on
Tuesday raised its 2023 global growth outlook slightly due to
"surprisingly resilient" demand in the United States and Europe,
easing energy costs and China's reopening.
    Dogged by Brexit, tax rises and serial labour strikes,
Britain was the clear outlier and is the only G7 nation to have
suffered a cut to its 2023 IMF, with the economy set to shrink
by 0.6% this year - a sharp downgrade from the prior IMF
forecast.
    The constellation leaves markets on the back foot as they
await the big monetary policy decisions.
    Deep in the weeds of the latest corporate earnings season -
with more than a fifth of S&P500 firms reporting this week alone
and Apple, Amazon and Alphabet all due on Thursday - Wall St
stock futures remain in the red after a dour start to the week
on Monday. European and Asia bourses were lower too. 
    The dollar  .DXY  has picked up across the board, with
two-year U.S. Treasury yields giving back only some of their
gains to near three-week highs on Monday.
    Despite the upbeat macro news, China tech stocks  .STAR50 
dropped 1.7% on media reports that the Biden administration has
stopped approving licenses for U.S. companies to export most
items to China's Huawei, signalling new tension in the Sino-U.S.
tech war.
    UniCredit  CRDI.MI  jumped 8.1% to the top of STOXX 600
after the giant Italian lender pledged to return 5.25 billion
euros ($5.69 billion) to investors based on its 2022 results
after posting its best profit in more than a decade.
     UBS  UBSG.S  shares fell 3% after the Swiss banking giant
predicted an "uncertain" year ahead plagued by accelerating
inflation and higher interest rates - even as it beat estimates,
upped its dividend and proposed another $5 billion stock buyback
this year.
    Indian billionaire Gautam Adani's $2.5 billion share sale
inched closer to full subscription on Tuesday as investors
pumped in funds after a tumultuous week for his group in which
its stocks were pummelled by a scathing short-seller report
Key developments that may provide direction to U.S. markets
later on Tuesday:   
* U.S. Federal Reserve's Federal Open Market Committee starts
two-day meeting 
* U.S. Q4 employment costs, Jan consumer confidence, Chicago PMI
business survey, Dallas Fed services index, Nov house prices
* U.S. corp earnings: Exxon Mobil, Marathon, Pfizer, McDonald's,
UPS, Amgen, Caterpillar, AMD, Stryker, Mondelez, Moody's, GM,
MSCI, Electronic Arts, Spotify, Snap, Chubb, Western Digital,
Juniper Networks, Boston Properties, Edwards Lifesciences,
Match, Sysco, Corning, Pentair, Intl Paper, AO Smith, Dover
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Rates and inflation Rates and inflation    https://tmsnrt.rs/3U8HdD2
Fed's bond cull lags some forecasts    https://tmsnrt.rs/3kTryKG
China economic activity rebounds    https://tmsnrt.rs/3DrrmIQ
UK is only G7 economy yet to regain pre-pandemic size    https://tmsnrt.rs/40b7V0O
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 (By Mike Dolan, editing by Ed Osmond,
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))