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Markets Brace for Crucial Week: U.S. Inflation, Bank Earnings, Crypto Volatility, and U.K. GDP in Spotlight

This week, all eyes are on U.S. inflation data as investors eagerly await clarity on the Federal Reserve’s future interest rate decisions. Simultaneously, major U.S. banks are commencing their earnings season, cryptocurrency markets are poised for volatility, and the U.K. is preparing to unveil its GDP figures. Here’s a breakdown of what you need to know to kickstart your week.

Inflation Insights:

The U.S. is gearing up to release the latest consumer price index figures on Thursday, followed closely by the report on producer prices a day later. Investors are closely scrutinizing these numbers for cues regarding potential shifts in interest rates.

Speculation surrounding a gradual cooling of inflation has led to speculation that the Fed might initiate interest rate cuts as early as March.

While hopes for a rapid easing triggered a robust rally in late 2023, bringing the S&P 500 within 1% of its all-time high, investor caution has settled in at the start of 2024. They await clearer signals on the timing and pace of these anticipated rate cuts.

The employment report for December, released on Friday, revealed more jobs added to the U.S. economy than anticipated. However, a separate report indicating a slowdown in service sector activity last month has bolstered expectations for prompt easing.

Throughout the week, investors will have the opportunity to hear from several Fed officials, including New York Fed President John Williams and Atlanta Fed head Raphael Bostic.

Banking Sector Earnings:

The earnings season kicks off with major U.S. banks such as JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) set to announce their fourth-quarter and full-year results on Friday.

In 2023, top lenders saw increased income from interest payments as the Fed hiked rates, offsetting a prolonged decline in dealmaking revenue within Wall Street divisions.

Attention is also directed towards consumer finances, which have largely remained robust post-pandemic. However, concerns arise as some lower-income customers are beginning to struggle with payments.

This earnings season serves as a litmus test for heightened expectations in corporate profits. Analysts, citing LSEG data referenced by Reuters, anticipate an 11% rise in S&P 500 earnings for 2024 after a mere 3% increase in 2023.

Bitcoin and Market Expectations:

The new year witnessed a strong surge in Bitcoin fueled by hopes for potential approval of exchange-traded spot bitcoin funds by U.S. regulators.

With Bitcoin surpassing $45,000 for the first time since April 2022, market optimism hinges on expectations that such applications will soon receive the Securities and Exchange Commission’s approval, potentially ushering in a fresh wave of capital into the crypto sphere.

However, Bitcoin has seen some retracement amid lingering doubts regarding the potential demand for a bitcoin ETF and whether the market has already factored in the approval.

U.K. GDP Outlook:

The U.K. is gearing up to unveil its GDP data for November, with economists anticipating a modest rebound after a dip in October, attributed to an unusually sharp decline in manufacturing activity.

Recent data suggesting a rebound in the U.K.’s service sector activity in December hints at the economy narrowly evading a recession, despite grappling with high inflation and borrowing costs at a 15-year peak.

With concerns about the economy mounting, business leaders are urging the Bank of England to consider interest rate cuts. Investors are already pricing in a potential reduction in interest rates come May.

BoE Governor Andrew Bailey, along with other policymakers, is slated to testify to parliament on financial stability on Wednesday.

What’s Moving Markets

U.S. stock futures edge lower on Monday with all-important inflation data out of the world’s largest economy due later this week. Elsewhere, Boeing (NYSE:BA) shares fall premarket as the planemaker and U.S. regulators reportedly discuss the criteria for safety inspections after a dangerous mid-air fuselage breach. Meanwhile, an executive at the electric vehicle division of China’s Evergrande is detained on suspicion of “illegal crimes.”

U.S. stock futures hovered below the flatline on Monday, as investors prepared for the release of key inflation data later in the week that could factor into how the Federal Reserve approaches potential interest rate cuts in 2024.

By 05:13 ET (10:13 GMT), the S&P 500 futures contract had shed 9 points or 0.2%, Nasdaq 100 futures had lost 36 points or 0.2%, and Dow futures had dropped by 178 points or 0.5%.

Attention is turning the publication of the U.S. consumer price index from the Bureau of Labor Statistics on Thursday, which is expected to show that headline inflation accelerated slightly to 3.2% in December. The measure registered a pace of 3.1% in November. Month-on-month, it is seen speeding up to 0.2%.

But the core figure, which strips out volatile items like food and energy, is seen slowing to 3.8% annually and 0.2% monthly.

How the numbers shake out could impact market estimates for U.S. interest rates in the coming months. Hopes that the Fed will slash borrowing costs early this year have waned recently, particularly after minutes from the central bank’s latest meeting showed that officials believed rates could remain elevated “for some time” to help bring inflation back down to its 2% target.

Evidence that the Fed’s fight to cool price gains is proceeding slower than anticipated could further lessen what was buoyant optimism amongst traders in the final weeks of last year.

Shares in Boeing fell sharply in premarket trading in New York on Monday, as reports say that the planemaker and U.S. regulators have hit a snag in carrying out safety inspections in the wake of a mid-air breach of a 737 Max jet last week.

On Friday, a plug in an emergency door ripped from the left side of a Boeing 737 Max 9 jet shortly after the takeoff of an Alaska Airlines flight from Portland, Oregon to Ontario, California. Pilots turned around and landed the plane. Several passengers were treated for minor injuries, but no deaths were reported.

The Federal Aviation Administration subsequently ordered the temporary grounding of around 171 Boeing jets on Saturday. The agency later said the planes will not return to the air until it is “satisfied that they are safe.”

But, citing people familiar with the matter, Reuters has reported that the FAA and Boeing have yet to agree on the criteria for the safety checks — a crucial step before the inspections can take place and flights can resume.

Boeing, meanwhile, is planning to hold a company-wide meeting to discuss the incident, according to media reports. The firm has already faced heavy scrutiny over two fatal crashes of its 737 Max 8 plane in 2018 and 2019.

3. Congressional leaders reach bipartisan deal on federal spending levels

Democratic and Republican leaders in Congress announced that they have reached an agreement to set the federal spending limit for the 2024 fiscal year at roughly $1.66 trillion.

The framework accord comes as lawmakers on Capitol Hill are racing to hammer out a deal to fund the government before several federal agencies are set to run out of money later this month.

Republican House Speaker Mike Johnson said the agreement includes “hard-fought concessions,” while Democratic leaders said it “clears the way for Congress to act.”

A final spending deal would need to be passed by both the House and the Senate before being signed into law by President Joe Biden.

The electric vehicle division of China’s Evergrande has said its Vice Chairman Liu Yongzhuo has been detained and is facing a criminal investigation, sparking a fall in the firm’s Hong Kong-listed shares.

In a filing with the Hong Kong Stock Exchange, China Evergrande New Energy Vehicle Group announced that Liu was detained in accordance with the law on suspicion of “illegal crimes.” It did not provide further details.

The announcement comes as Evergrande (HK:3333), the division’s parent and the focal point of a real estate crisis that has threatened to disrupt the Chinese economy, faces a hearing later this month over demands from offshore bond holders to wind up the company. Evergrande’s chairman Hui Ka Yan is also being investigated for suspected crimes, a separate filing in September showed.

Evergrande NEV, which once held ambitions of producing a million cars a year by 2025, sold just 760 of its only EV model in the first half of last year. It also posted a net loss of 6.9 billion yuan during the period.

Oil prices fell Monday after Saudi Arabia slashed the prices of its Asian crude exports to over two-year lows, adding to the current narrative that global demand remains weak.

By 05:14 ET, the U.S. crude futures traded 2.0% lower at $72.32 a barrel, while the Brent contract dipped 1.9% to $77.30 per barrel.

Major crude exporter Saudi Arabia on Sunday cut the February official selling price of its flagship Arab Light crude to Asia to the lowest level in 27 months.

Yet, despite these worries over global economic activity, both benchmarks climbed more than 2% last week on rising geopolitical tensions in the Middle East following attacks by Yemen-based Houthis on ships in the Red Sea, prompting disruptions in shipping activity in the region.


Moderna Beats Sales Forecasts in 2023, Sees Optimistic Growth Trajectory Ahead

Moderna (NASDAQ: MRNA) experienced a slight uptick in its stock value following the announcement of its 2023 product sales that surpassed analyst predictions.

The company revealed unaudited product sales reaching around $6.7 billion for the year, surpassing the estimated consensus of $6.38 billion. Notably, Moderna significantly expanded its U.S. COVID-19 market share, hitting 48% year-to-date in 2023, a substantial increase from the previous year’s 37%.

This positive news nudged shares up by 1.1% in early Monday trading.

Investing smartly is like creating a gourmet recipe; it’s not just about throwing in all the ingredients, but knowing the perfect balance and timing to whip up a delicious dish. It’s a blend of financial finesse and strategic seasoning, where patience marinates with research, risk gets diced finely, and diversification adds the right zest. So, remember, when it comes to investing, it’s not just about cooking up money; it’s about savoring the taste of well-planned success!