US stock market shows weakness again

The US stock market ended Wednesday's trading in the red zone. The growth of government bond yields reflects the market's growing concern that central banks would reduce the quantitative easing program and raise interest rates more aggressively than originally anticipated. This is having a negative effect on the stock market, and especially on the technology companies. As the stock market closed, the S&P 500 Index (US500) decreased by 0.97%, the Dow Jones Industrial Average (US30) lost 0.96%, and the Nasdaq Technology Index (US100) fell by 1.15%. Stock markets have been falling since Fed officials said in mid-December that plans to reduce bond purchases and other stimulus measures that boost stock prices would be accelerated by a jump in US inflation. At the same time, analysts expect government bond yields to continue rising and exceed 2% in the first quarter of 2022.

In a speech yesterday, US President Joe Biden urged the Fed to do more to fight inflation.

Meanwhile, the focus of the market remained at the beginning of the corporate reporting season. Shares of Procter & Gamble, which makes household and consumer products, rose 3.4 percent after posting strong financial results.

Netflix Inc. will announce fourth-quarter results on Thursday. The streaming giant is expected to report earnings per share of 84 cents on revenue of $7.71 billion.

Yesterday, Europe's major stock indexes were mostly up on the back of good corporate reports from European companies. Strong company reports over the last quarter offset pressure on the market from higher government bond yields amid rising inflation and growing expectations of tighter monetary policy by global central banks. German DAX (DE30) gained 0.2%, British FTSE 100 (UK100) added 0.35%, French CAC 40 (FR40) increased by 0.55%, Spanish IBEX 35 (ES35) added 0.08%. Germany's consumer price index increased by 0.5% in December to 3.1% in annual terms. This is the highest level since 1993. Meanwhile, the ECB's balance sheet continues to rise. On Wednesday, German 10-year bond yields rose above 0% for the first time since 2019, providing support for the euro. Eurozone inflation data will be released today. Analysts expect consumer prices to remain at the same level.

Oil prices are trading near their highs, and the fundamentals are now in favor of higher oil prices. But data from the American Petroleum Institute (API) released on Wednesday showed a 1.404 million-barrel increase in US oil inventories last week after a 1.077 million-barrel decline a week earlier. The US President Joe Biden told reporters yesterday that his administration would continue to try to lower oil prices. If today's oil inventory data from the US Department of Energy shows an increase, oil could decline slightly.

Due to a reduction in gas supplies from Iran to Turkey, officials in the sector have ordered electricity producers using natural gas to limit consumption by 40%.

Gold and silver were surprisingly immune to the news backdrop and rising government bond yields. Usually, when bond yields rise, the precious metals fall, but not this time. Inflationary pressures are now so high that investors are buying gold as a hedge against further price increases.

On Thursday, stock markets in the Asia-Pacific region (APAC) are rising in trading amid a cut in Chinese central bank rates and positive statistics from Japan. The People's Bank of China cut benchmark lending rates for the second month in a row in response to a slowdown in economic growth. China's 1-year prime lending rate reduced from 3.85% to 3.7%. China's central bank cut rates on one- and five-year loans after growth in the world's second-largest economy fell to 4% year-over-year in the latest quarter as a result of a crackdown on rising debt among real estate developers. Investor optimism about Chinese stocks is rising as the central bank has promised to use more monetary tools to stimulate the economy, even as the Federal Reserve prepares for a series of interest rate hikes. Hong Kong's Hang Seng Index (HK50) has jumped 3.2% since the opening trading today.

Japan's economic performance has improved despite an increase in Omicron disease. Exports increased by 17.5% in December compared with the previous year. Auto export growth accelerated to 17.5% from 4.1% in November. Japan's Nikkei 225 Index (JP225) increased by 1.11% from the open.

Main market quotes:

S&P 500 (F) (US500) 4,532.76 −44.35 (−0.97%)

Dow Jones (US30) 35,028.65 −339.82 (−0.96%)

DAX (DE40) 15,809.72 +37.16 (+0.24%)

FTSE 100 (UK100) 7,589.66 +26.11 (+0.35%)

USD Index 95.58 −0.16 (−0.16%)

• - Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
• - China PBoC Loan Prime Rate (m/m) at 03:30 (GMT+2);
• - German Producer price index (m/m) at 09:00 (GMT+2);
• - Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• - Eurozone ECB Monetary Policy Statement at 14:30 (GMT+2);
• - US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• - US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+2);
• - US Existing Home Sales (m/m) at 17:00 (GMT+2);
• - US Natural Gas Storage (w/w) at 17:30 (GMT+2);
• - US Crude Oil Reserves (w/w) at 18:00 (GMT+2).

by JustMarkets, 2022.01.20

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.