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G&T Team
ResearchResearch Reports Global Equity Markets, 9 January 2023

Global Equity Markets, 9 January 2023

Executive Summary:

Disappointing labor market and activity data cheer the US markets. Despite the non-farm payrolls (i.e., the newly created jobs in the US) coming in slightly higher than expected, the overall declining trend has continued in December. In addition, the hourly earnings have grown by less than expected (4.6% y/y vs 5.0% forecast). These data releases demonstrate a much-anticipated cooling of the US labor market.
Another by-product of Fed’s hiking cycle was the non-manufacturing PMI figure. The services PMI came in well below expectations (49.6 vs 56.5 forecast), entering the contractionary zone (i.e., below the 50-point threshold) for the first time since the COVID-19 outbreak in 2020. In addition, the factory orders contracted by higher than expected rate of -1.8% m/m. In response, the US equity markets have rallied.

Euro Area delivers a mixed, but optimistic inflation reading. While headline inflation for December surprised on the downside and fell to 9.2% y/y from November’s 10.1%, the core figure came in higher-than-expected at 5.2% y/y, which is an increase from the previous reading of 5.0%. Investors have cheered the news on the headline figure more, as illustrated by positive movements in European equity indices. This is because the lower headline inflation promises reduced core inflation in the near future.
Adding to the positive news, manufacturing and services PMIs in Spain, Italy, France, Germany, and Euro Area have kept improving in December, however, mostly remaining in contractionary zones. The Euro Area manufacturing PMI has climbed to the three-month high of 47.8, while the services PMI rose to the five-month high of 49.8.

On Friday premarket, most of major US banks will report their latest quarterly results. The inferred demand conditions for banking services will have meaningful implications for the general state of the economy. Therefore, the abovementioned earnings reports are likely to have a market-wide impact.