Dovish Central Bank Perception Trumps Mega cap Disappointment, Risk On Extends

Macroeconomic/ geopolitical developments

• The MASSIVE week for market data and events resulted in an extension of the 2023 “risk on” theme from January into February.
• Wednesday’s FOMC decision to hike rates 0.25% as expected was met with a perception of a slightly more dovish tone from Fed Chair Powell.
• In addition, both the Bank of England (BoE) and European Central Bank (ECB) hiked rates 0.50% on Thursday, but again markets perceived comments as more dovish than expected.
• Mega cap stocks in the US were overall disappointing in their results and guidance, despite a positive tone from Meta, as Apple, Amazon and Alphabet all disappointed.

• The US Employment report surprised significantly to the upside on Friday, with the NFP data massively beating expectations, posting at 517K, as the Unemployment rate fell to 3.4%, its lowest since 1969.

• The Institute for Supply Management (ISM) non-manufacturing PMI jumped to 55.2 from 49.2 in December, way above consensus, whilst S&P Global Services and Composite data from European economies also broadly beat estimates.

Global financial market developments

• The major US, European and Asian stock averages were all positive territory again for the week, moving to multi-month highs.
• Growth stocks were again the leaders with the Nasdaq posting a fifth successive week of gains.
• The UK benchmark index, the FTSE 100 hit a new record high, buoyed by a weaker Pound.

• US and European Bond yields were erratic, but broadly sideways.
• The US Dollar Index hit a new multi-month low but posted a strong rebound into the end of the week.
• Gold nudged higher to initially build on the 2023 surge, to then plunge from another new multi-month high.
• The January Oil rally has been reversed, with the market back close to multi-month lows.
• Copper sold off from near multi-month highs, for a more negative tone.

Key this week

• Central Bank Watch: Focus this week will be on Tuesday with the Reserve Bank of Australia (RBA) interest rate decision and the Fed’s Powell speaks at the Economic Club of Washington, D.C.
• Macroeconomic data: A light week for data, German CPI, UK GDP and US Michigan Consumer Sentiment are the standouts.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued