January 30, 2023

“There is potential for market volatility this week as investors’ attention will be heavily focused on central banks. The Fed, ECB, and BoE are all scheduled to meet and are anticipated to raise interest rates to 15-year highs. Investors have been debating whether the size of rate hikes have reached their peak after sluggish GDP data and slowing inflation rates.”

Tim Hallinan – Trading Director

 

Main Headlines

America’s 2024 presidential race is showing signs of kicking into gear amid reports that Florida’s rightwing Republican governor Ron DeSantis is now laying the groundwork for a White House bid as Donald Trump finally hit the campaign trail. DeSantis’s moves even spurred Trump into attacking him directly as the former US president held relatively low key events over the weekend in the key early voting states of New Hampshire and South Carolina. DeSantis began his time as Florida’s governor in the shadow of Trump, whose political messaging he closely emulated. But he has since emerged as Trump’s most powerful political rival in the Republican party.

Nadhim Zahawi has been sacked as Tory Party chairman, after an inquiry by the prime minister’s ethics adviser found he had failed to disclose that HMRC was investigating his tax affairs. The PM said Sir Laurie Magnus’s inquiry made clear there had been a “serious breach of the ministerial code”. Rishi Sunak asked for the probe after Mr Zahawi admitted paying a settlement to HMRC, including a penalty. Sir Laurie said the MP had missed many chances to be open about his tax. Mr Zahawi has previously insisted that he acted properly, and that his tax error was “careless and not deliberate”.

 

GBP

Sterling is stronger against the dollar and weaker against euro this morning. Regional airline Flybe has gone bust for the second time, with all flights cancelled and passengers left stranded. The UK Civil Aviation Authority (CAA) made the announcement the company had gone into administration and urged those with booked Flybe flights not to travel to airports. Passengers were emailed overnight and told not to turn up for check-in. The airline also confirmed the “sad” move, noting that administrators had been brought in. It comes after Flybe returned to the skies in April following an earlier collapse.

 

EUR

Euro is well bid against most major currencies overnight. The German economy unexpectedly fell in the fourth quarter, data showed today, a sign that Europe’s largest economy may be entering a much-predicted recession as an effect of the Ukraine war. Germany’s gross domestic product decreased 0.2% quarter on quarter in adjusted terms, the federal statistics office said. In the previous quarter, the German economy grew slightly by an upwardly revised 0.5% quarter on quarter. The decrease in the fourth quarter means a recession, commonly defined as two successive quarters of contraction, has become more likely, as many experts predict the economy will shrink in the first quarter of 2023 as well.

 

USD

The dollar is weaker than most major currencies in the early morning trade. Donald Trump kicked off his 2024 presidential election trail over the weekend with two major campaign events, launching attacks on what he called the “cult of gender ideology” and “radical racists”. The former president spoke to about 200 people in the South Carolina state capitol building, in a notably muted event in contrast to his usual raucous rallies in front of thousands of devotees. Mr Trump said he would focus on defeating “the cult of gender ideology and reaffirm that God created two genders: men and women”.

 

Markets

European markets opened lower this morning as investors focus on the next US Federal Reserve meeting that begins Tuesday. The two-day meeting will conclude with the central bank’s Federal Open Market Committee announcing its latest interest rate decision. The pan-European Stoxx 600 index was down 0.5% by mid morning, with nearly all sectors in the red. Tech led losses, down 2%. Overnight in the Asia-Pacific region, stocks traded mostly lower as shares of Adani Group remained volatile after the conglomerate rebutted short seller firm Hindenburg’s accusations of embezzlement and fraud.

 

Main Economic Data/Central Banks/Government (All Times CET)

9:00 a.m.: Spain Jan. CPI
10:00 a.m.: Germany 4Q GDP
11:00 a.m.: Euro-Area Jan. Economic Confidence
2:15 p.m.: ECB’s Villeroy speaks
4:30 p.m.: US Dallas Fed’s manufacturing activity index

Corporate Events

Earnings include Philips, NXP Semiconductors, Ryanair, GE HealthCare, Whirlpool

 

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