Weekly News 2023/01/16-2023/01/20

On Friday, the three major U.S. stock indexes closed up collectively. The Dow Jones index closed up 330.93 points, or 1.00%, to 33375.49 points; the S&P 500 index closed up 73.76 points, or 1.89%, to 3972.61 points; the Nasdaq composite index rose 288.17 points, or 2.66%, to 11140.43 points. However, Friday's rebound failed to reverse the decline of previous days. Both the Dow and the S&P 500 recorded their first weekly decline since 2023, stopping two consecutive gains. From the weekly data, the Dow fell 2.7%, the S&P 500 fell 0.66%, and the Nasdaq rose 0.55%.

A number of Fed officials voiced their belief that the U.S. economy may achieve a soft landing, which may boost market sentiment. Federal Reserve Governor Waller said that he supports further slowing the pace of interest rate hikes at the next FOMC meeting from January 31 to February 1. It is expected that the FOMC will raise interest rates by 25 basis points at the next meeting, and monetary policy will still be tightened, but Optimistic about a soft landing for the economy.

Investors have a different view on how quickly the Fed will ease monetary policy. Analysts warn that investor's divergence could add to market volatility this year. Some investors are even betting the Fed will start cutting rates later this year, though Fed officials have recently dismissed that notion, emphasizing keeping rates high for a while until inflation falls back to its 2% target.

Amazon's (NASDAQ: AMZN) cloud computing unit will spend $35 billion building new data centres in Virginia by 2040, underscoring the company's determination to stay ahead of rivals Microsoft Corp and Alphabet. The VA said in a release Friday that Amazon's investments in multiple locations will create approximately 1,000 jobs in Virginia. Virginia is the most important centre for Amazon Web Services. The state government said some sites were under consideration and would be selected at a later date.

General Motors (NYSE: GM) announced on January 20 local time that it plans to invest $918 million in four factories in the United States to support the production of electric vehicle components and next-generation V-8 engines. Of that, $579 million will go to GM's Flint, Michigan, engine plant to assemble the sixth-generation Small Block V-8 fuel engine. The remainder of the investment will go to other components operations in Michigan, Ohio and New York for fuel-powered components such as camshafts and manifolds, as well as castings to support future electric vehicles.

Tesla (NASDAQ: TSLA) Germany's official website shows that the company has postponed the delivery time of Model 3 from February to April from the previous January to March. Earlier, Tesla cut the prices of its cars by between 4% and 12%. Tesla's delivery times in the German market are still well ahead of rivals, according to car comparison portal carwow.

Bitcoin prices started to climb as investors returned to riskier assets. Bitcoin has soared to more than $21,000 per coin in the past week, breaking through the narrow range of around $17,000 after the collapse of the FTX encryption exchange in November last year.

Since January 5, Bitcoin has risen for 16 consecutive days, with an increase of more than 25% during this period, which is about to set the longest upward cycle since November 2013. Investors are betting that if inflation is indeed retreating, the pressure on the Federal Reserve and other central banks to raise interest rates aggressively will ease, allowing markets to moderately switch to more “risk-on” strategies.

Coindesk data shows that at present, Bitcoin is hovering in the range of 20982-21124 US dollars per coin. Bitcoin has driven the overall increase in the market value of cryptocurrencies this time. According to data from CoinMarketCap, the total market value of global encrypted assets has risen to nearly 1 trillion US dollars, but it is still far below the peak of more than 3.2 trillion US dollars in November 2021.

Sentiment toward cryptocurrencies has been boosted by overall gains across most asset classes so far this year in hopes of a “soft landing” for the U.S. economy, according to JPMorgan analyst Nikolaos Additionally, a weaker U.S. dollar also helps, as it pushes up the price of commodities like gold, which in turn helps to reprice bitcoin as an alternative asset class.

Gold prices fell 0.2% to $1,928.06 an ounce on Friday as the U.S. dollar strengthened, though the metal still posted its fifth straight weekly gain, Spot gold has risen 0.4 percent so far this week. Investors believe that the Federal Reserve will slow the pace of rate hikes.

The soft landing envisioned by the Fed requires avoiding a sharp rise in unemployment, a marked slowdown in inflation and an eventual return to the 2% target. The Fed's goal remains a soft landing for the economy but acknowledges the risk of a contraction. A growing acceptance that the Fed will soften its hawkish stance amid more signs of easing inflationary pressures could limit any meaningful upside for the dollar. Speculation that the Fed may be coming to an end to its current rate hike cycle will also provide some support for non-yielding asset gold.

“The U.S. dollar is trying to stabilize a bit, so we may see gold prices fall next week,” said commodity strategist Daniel Ghali. Alleviating concerns and prompting investors to buy safe-haven gold.

Gold prices are expected to rise above $2,000 an ounce and hit record highs this year, as expectations of a global recession deepen and major central banks around the world will have to slow down and eventually stop raising interest rates.

Oil prices settled up about $1 a barrel on Friday, posting a second weekly gain, as a brighter economic outlook in China, the world's second-largest economy, boosted expectations for demand for its fuel. The International Energy Agency (IEA) said on Wednesday that the lifting of coronavirus restrictions should push global demand to a record high this year. “Many traders believe that as China continues to lift COVID-19 restrictions, it is highly likely that we will see increased demand from China,” said Naeem Aslam, an analyst.

Invertors hopes that the Federal Reserve will soon scale back to smaller rate hikes, which could brighten the outlook for the U.S. economy, also supported oil. A Reuters poll predicted the Fed would end its tightening cycle after raising rates by 25 basis points at each of its next two policy meetings, and then expect to keep rates steady for at least the rest of the year.

“The world's two largest economies need more crude, The oil market has been falling on global recession fears, but there are still signs it can stay tight for longer state.” said senior market analyst Edward Moya.

Oil prices rose even after U.S. inventory data this week showed crude stockpiles rose by 8.4 million barrels in the week to Jan. 13 to about 448 million barrels, the highest level since June 2021.

The US dollar fluctuated around 102 on Friday, and Fed Governor Waller supported reducing the rate hike to 25 basis points at the next meeting. “Based on the data available so far, there seems to be little volatility ahead, so I'm currently in favor of a quarter-point hike at the next (FOMC) meeting,” Waller said in remarks prepared for the Council on Foreign Relations meeting in New York. The next meeting will be held from January 31st to February 1st. Waller said he remained “cautious” about the path of inflation and expected “continued tightening of monetary policy” to be needed to bring inflation back down to the Fed's 2 percent target.

The euro edged higher against the dollar on Friday after European Central Bank Governing Council and Austrian central bank president Robert Holzmann told the Austrian newspaper Presse on Friday that he expected at least two rate hikes in the first half of the year, with each 50 basis points. His comments were in line with recent comments from other ECB policymakers after ECB President Christine Lagarde pushed back on market bets the central bank would slow the pace of rate hikes. Bets on slower rate hikes come as inflation has fallen recently and the pressure to keep pace with other central banks has eased.

Traders have recently scaled back their expectations that the ECB will raise borrowing costs after data showed inflation was falling in both the euro zone and the US, and as the Federal Reserve discussed scaling back rate hikes.

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