The strength in the financial markets continued in the last trading week. The US stock indices S&P500 and Nasdaq100 are looking back at their best week since November 2022. The fact that inflation in the US is still falling and that the danger of further increases in inflation rates seems to have been averted for now prompted investors to act more bullish and flow back to the markets. Bitcoin (BTC) also benefited from the increased risk appetite and was able to resolve its trading range of the last two months to the upside on Thursday evening. In the late evening hours of the following day (January 13) there was a veritable price explosion in the crypto market.
The Bitcoin price shot northward within a few hours of trading, initiating a liquidation cascade of more than $500 million in leveraged short positions. As a result, the cryptocurrency hit $21,321, pulling the entire crypto sector higher with it. As a result, the total market capitalization has been able to regain the psychological mark of 1 trillion US dollars for more than two trading months. In the new trading week, the US reporting season continues to gather momentum with figures from Netflix. Better-than-expected quarterly results from the major US banks JP Morgan, Citibank and Wells Fargo ensured a continued friendly mood among investors on Friday.
These events are the focus of market participants
In view of the important economic data, the new trading week does not really take off until Tuesday due to Martin Luther King Day in the US. Fresh economic data from the People’s Republic of China will kick things off. In the middle of the week, with fresh producer prices and retail sales, market participants await the release of several key figures on the state of the US economy. On Thursday, investors will also see the publication of the ECB meeting minutes from the last interest rate meeting in December. At the end of the week, investors focus on the development of the US real estate market.
The gross domestic product and industrial production in China open the new trading week
Tuesday 17 January 2023: Investors are initially looking to the Far East this week. In the early hours of the morning (03:00 CET), the current gross domestic product for the last quarter of 2022 and new industrial production figures for the previous month of December will be released in China. Based on GDP data from China, market experts hope to draw conclusions about the situation in the second largest economy in the world. After a rebound in the last trading quarter, experts are again predicting lower growth for the fourth quarter. While the growth rate in the previous quarter was still 3.9 percent, analysts now assume a drop from 3.9 percent to just 1.8 percent growth. Although the Chinese government surprisingly overturned its 0-Covid policy in the last few weeks, entire cities were shut down again during the underlying calculation period due to the increased number of infections.
If the decline is less sharp than expected, investors should take this positively, and contrary to expectations, China may have exported more to the US and Europe than expected. That would be an indication that the situation on world markets could have eased further. Market participants are also looking at the development of industrial production in the recent month of December. Industrial production measures the change in the industrial output of manufacturers, mines and utilities. After 2.2 percent in November, market analysts expect a significant drop to 0.5 percentage points for December. If, contrary to expectations, economic activity has been more resilient to the many problems in China, prices in the US stock market and thus also in the crypto sector could benefit from this.
Release of consumer price indices in the United Kingdom (UK)
Wednesday 18 January 2023: The Office of National Statistics publishes the latest inflation data for December at 08:00 (CET). A slight decrease is expected from the last 10.7 percent to 10.6 percent compared to the same period last year. If the market analysts’ forecasts are confirmed and inflation continues to fall on the island, the general trend is also evident here. If the estimate falls short of market analysts’ expectations, the British pound is likely to rise against the US dollar. As before, this can have a positive effect on the stock and crypto markets. On the other hand, should the consumer indices turn out higher than expected, it would be a warning for the financial market and the US dollar may regain strength. For Bitcoin and Co. would it be bearish.
US producer prices and retail sales provide new insights into the US economy
Wednesday 18 January 2023: New US producer prices (PPI) for the last month of December follow at 14:30 (CET). The market experts predict a month-on-month drop from the recent 0.3 percent to -0.1 percentage points. If price increases were to fall again in November after producer prices have recently rebounded, the strength of the US dollar should decline further and lead to a bullish price reaction in financial markets. However, if producer price inflation remains high and exceeds analysts’ expectations, as was the case in the last accounting period, this could lead to falling prices in the market. There is no need to save on the crypto market either.
At the same time, at 14.30 (CET), the core rate for retail sales in the US for the month of December will be presented. Most recently, sales in the US retail trade were again in negative territory with -0.2 percent, which confirms the continued reluctance of private households to spend money. With -0.4 percent, the analysts expect that retail sales will continue to fall. If the published numbers are even below experts’ defensive estimates, pressure on the Fed could increase further. Lately, weak retail sales have had a negative impact on stock market prices as well as in the crypto sector. If this trend continues, the mantra of “bad news is good news” may be reversed. On the other hand, if, against expectations, the retail sector was able to increase its sales leading up to Christmas, investors should consider this positive, as the US reporting season starting from Amazon, Apple and Co. may also be better than expected. A positive price reaction on the financial markets will therefore be quite likely shortly before the presentation of the quarterly figures in the coming weeks. The crypto sector should also be able to benefit from this development.
The ECB’s meeting minutes provide insight into the position of the European Central Bank
Thursday 19 January 2023: At 13:30 (CET) the top monetary watchdogs in the euro area will present the transcript of the last central bank meeting on 15 December. Market watchers will scrutinize the minutes of the previous ECB meeting for deviations from Ms Lagarde’s current interest rate policy to filter out conclusions about future monetary policy in Europe. Any indication of a less hawkish monetary policy by the European Central Bank in the future could lead to price increases in stock indices in Europe and also have a positive impact on the crypto market. Investors continue to cling to any indication of less restrictive monetary policy from the world’s main central banks.
US Existing Home Sales released
Friday, 20 January 2023: 16:00 (CET) market experts will focus on the updated sales figures for existing properties for the past month of December. The monthly data collected by the Association of US Realtors reflects citizens’ current level of consumption. Higher-than-expected sales indicate rising consumer spending in the US. If housing sales of existing properties do not meet market analysts’ expectations, as they have recently, it will be confirmation of the increasing cooling of the housing market, which is so important to the United States. The December expert forecast of 3.95 million home sellers is below the 4 million existing home sales mark for the first time in over two years. If the published figures reach the expected value or are even lower, a further weakening of the US dollar must be planned. It remains to be seen whether this significant cooling in the housing market will have a positive effect on the stock and crypto markets, as it did in 2022. Bad news from the real estate sector, such as weak retail sales, may now have an increasingly negative impact on the financial market . The US Federal Reserve has recently repeatedly confirmed that it does not want to change its monetary policy because of this.
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