Inflation in European countries began to decline

The US stock indices continued their Friday growth on Monday. By the close of the trading session, the Dow Jones index (US30) gained 1.17%, the S&P 500 index (US500) added 1.89%, and the NASDAQ technology index (US100) jumped by 3.41%. Yesterday's speech by Fed officials appeared to reduce the probability of a 50 basis point rate hike in March, with three rate hikes scheduled for 2022, not 4-5 as analysts predict. On Monday, the US Treasury chief economist also said that inflationary pressures should ease this year due to lower demand for goods, easing supply chain problems, and the easing of the coronavirus pandemic. Investors' attention will now focus on the US labor market report for January, which will be released on Friday, and on reports from major companies, especially Alphabet, Meta Platforms (Facebook), Amazon, Exxon Mobil, and General Motors.

The main theses from Fed spokesman Bostick's speech:

  • The Fed forecasts inflation at 3% in 2022;
  • If inflation falls quickly, the Fed may act more slowly, but this is not the most likely scenario as businesses seem to have already factored in rising prices;
  • January's employment report is likely to be "slightly lower" than in recent months, showing the impact of the Omicron;
  • We hope that job growth will recover in February and March;
  • There are still three rate hikes scheduled for 2022.

At the same time, Goldman Sachs analysts still expect five Fed rate hikes in 2022.

European stock indexes mostly grew on Monday. German DAX (DE30) gained 0.99%, French CAC 40 (FR40) increased by 0.48%, Spanish IBEX 35 (ES35) added 0.03%, British FTSE 100 (UK100) was an exception and decreased by 0.02%. Consumer prices in Spain declined by 0.5% in January; the year-over-year inflation rate fell from 6.5% to 6.0%. The INE report notes that the slowdown in inflation is due to falling electricity prices. Germany's consumer price index showed a decline by 0.4% to 5.1% in annual terms, but analysts had expected a stronger drop in inflation in Germany. Italy's GDP grew by 6.5% in 2021. The EU is preparing a package of personal, economic, financial, and trade sanctions against Russia.

OPEC oil production rose 210,000 barrels per day (BPD) on a monthly basis in January to 28.01 million BPD. Several countries, led by Saudi Arabia, showed growth in oil production, while Libya and Iraq saw declines in production.

Asian markets traded in positive territory on Tuesday. Japan's Nikkei 225 (JP225) added 0.28% and Australia's S&P/ASX 200 (AU200) increased by 0.49%. Japan's unemployment rate fell to 2.7% in December from 2.8%. The published data showed a recovery in the country's labor market despite an increase in Covid-19 in the last two months. The central bank of Australia (RBA) kept interest rates unchanged and announced it was reducing its bond-buying stimulus as expected but said it was not a signal to raise rates anytime soon and was ready to be patient while exploring price pressures. Retail sales in Australia fell 4.4% in December from the previous month, the biggest drop since April 2020 amid rising Omicron illnesses.

China's Alibaba received some negative comments from Wall Street as Mizuho lowered its target price on the Chinese e-commerce company, noting expectations for a "challenging quarter."

Main market quotes:

S&P 500 (F) (US500) 4,515.55 +83.70 (+1.89%)

Dow Jones (US30) 35,131.86 +406.39 (+1.17%)

DAX (DE40) 15,471.20 +152.25 (+0.99%)

FTSE 100 (UK100) 7,464.37 −1.70 (−0.023%)

USD Index 96.65 −0.62 (−0.64%)

Important events for today:
  • - Japan Unemployment Rate (m/m) at 01:30 (GMT+2);
  • - Australia Retail Sales (m/m) at 02:30 (GMT+2);
  • - Australia RBA Interest Rate Decision (m/m) at 05:30 (GMT+2);
  • - Australia RBA Rate Statement (m/m) at 05:30 (GMT+2);
  • - German Retail Sales (m/m) at 09:00 (GMT+2);
  • - French Consumer Price Index (m/m) at 09:45 (GMT+2);
  • - German Manufacturing PMI (m/m) at 10:55 (GMT+2);
  • - Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • - UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • - Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
  • - Canada GDP (q/q) at 15:30 (GMT+2);
  • - US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
  • - US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
  • - New Zealand Unemployment Rate (q/q) at 23:45 (GMT+2).

by Justforex, 2022.02.01

We advise you to get acquainted with the daily forecasts for the major currency pairs.

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.

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