Market Outlook Week 30-03 February

Global markets finished the week mix

Global markets started the week lower. Germany’s gross domestic product (GDP) declined by 0.2% in the fourth quarter of 2022 compared to the previous three-month period, slightly more than analysts predicted. In addition Consumer confidence in the United States declined in January, at 107,1 down from the predicted 109.0. Moreover, on Wednesday markets were mix after lower than expected inflation in Europe. Furthermore, US Federal Reserve interest rate rose by 25 basis points. Lastly, both European Central Bank and Bank Of England’s raised their interest rates by 50 basis points as expected. The Dow Jones dropped by 0.38% at the closing bell on Friday. The S&P 500 declined by 0.25%. Furthermore, the DAX fell by 0.21%, CAC 40 rose by 0.94% and the FTSE 100 surged 1.04%, reaching its all-time high. In addition, investors are looking forward for the Initial Jobless Claims on Thursday, which is expected to grow to 190K from the previous 183k.

Treasury yields advanced towards the end of the week

Yields advanced after a better than expected Nonfarm payrolls. Increased by 517000 jobs for January, particularly above the 187,000 additions estimated by Dow Jones. In addition, the unemployment rate fell to 3.4%, lower than the 3.6% expected by Dow Jones. The yield on the 2-year Treasury increased to 4.299%. Short-term rates are more sensitive to Fed rate hikes. The 10-year Treasury yield, hit 3.526%, up by about 12 basis points. The 30-year Treasury yield, which is key for mortgage rates, hit 3.627%. The spread between the US 2’s and 10’s widened to -77.3bps, while the spread between the US 10-Yr Treasury and the German 10-Yr bond (“Bund”) widened to – 131.3bps.

Volatile week for USD

The US Dollar moved higher towards the end of the week after better than expected non – farm payrolls in USA potentially giving the Federal Reserve more leeway to keep hiking interest rates. In addition, initial jobless claims in the United States declined by 3,000 to 183,000 in the week ending January 27. Therefore, the EURUSD traded lower at 1.08040. Furthermore, the GBPUSD ended the week lower at 1.20550 and the USDJPY traded higher at 131.20 on Friday.

Oil and Gold traded lower towards the end of the week

Gold started the week lower after concerns over economic key events. However, Gold traded higher in the middle of the week further to the Federal Reserve’s decision to raise interest rates by another 25 basis points. Gold traded lower at the end of the week after better than expected non – farm payrolls in USA showing the labor market still remaining strong despite a tight monetary policy. Prices of Oil moved lower at the start of the week, as investors waited for the next meeting between the Organization of the Petroleum Exporting Countries (OPEC) and its Russia-led partners due on February. However, Oil traded lower in the middle of the week after crude oil in the country’s stockpiles increased by 4.1 million barrels since a week ago. In addition, on Friday, the prices of oil futures fell as global economy raised demand concerns. Meanwhile, the Crude Oil Inventories report will be released on Wednesday. A decrease is expected in the number of barrels held by US firm by 3.764M

Stock indices performance