Frankfurt, 20 January – The new stock exchange week is also characterized by economic data. Investors continue to look for signs of how much rate hikes by the Federal Reserve and other major central banks could hurt the economy. After mixed US economic data last week, there are fears that “the US economy will be the first victim of tight monetary policy and will slide into a recession,” the analysts at Helaba wrote. These concerns pushed the leading German index back below the psychologically important 15,000 mark, which it temporarily exceeded during the rally at the beginning of the year. The Dax was quoted on Friday at 14,975 points, 0.7 percent below last week’s close.
The surprise increase in the purchasing managers’ index in December fueled hopes in the first days of January that the economy in the euro area might avoid a recession, says analyst Christoph Weil at Commerzbank. However, the improvement in sentiment probably primarily reflects the significantly reduced risk of gas rationing. However, the noticeable deterioration of the economic environment continues to speak for a slight decrease in economic output in the first half of the year.
Meanwhile, investors in China can expect a respite. Stock exchanges in the People’s Republic will remain closed from Monday to Friday in the new week due to the Chinese New Year holiday.
FOCUS ON EARLY INDICATORS
The new economic data week starts on Tuesday with the purchasing managers’ index. Financial services provider S&P Global publishes preliminary Purchasing Managers Indices (PMIs) for January. Economists expect the barometer to again approach the growth threshold of 50 points with a value of 49.7. The downturn in the German economy had unexpectedly eased significantly in December to 49.0 points, and the eurozone also slowed its economic slowdown. In addition, the GfK market researchers publish the consumer barometer, which signals consumer sentiment in February. Economists polled by Reuters expect a rise to minus 33.0 from minus 37.8 points in January despite the energy crisis and high prices, meaning sentiment is slowly working its way out of the trough.
In the middle of the week, Munich’s Ifo Institute presents the first business climate index for the current year. Experts polled by Reuters expect the key barometer to rise to 90.1 points in January from 88.6 points in December. Robert Greil, chief strategist at private bank Merck Finck, remains cautious. Even if the Ifo business climate were to increase slightly for the fourth time in a row, the PMIs would need to jump well above the 50 threshold to support the recent Dax recovery. “Despite all the burgeoning optimism, the risk of war and energy prices, as well as inflation, which is still far too high, and the related probably even more increases in policy rates, should not be underestimated as a continuing burden on the economy.”
On Thursday, the US Commerce Department will release gross domestic product (GDP) data for the fourth quarter of 2022. Although the country is plagued by recession worries at a time of rising interest rates and high inflation, the economy will likely have performed quite well before the turn of the year: Expect the fourth quarter of 2022 Experts polled by Reuters showed an annual increase in GDP of 2.8 percent, after growth of 3.2 percent in the summer quarter. The analysts at Helaba, however, urge caution. “Robust US GDP figures should not obscure the prospect of a weak start to the year.”
BALANCE SEASON CONTINUES – AN EYE ON THE AMERICAN GIANT
At the same time, investors are scrutinizing major companies’ financial results and forecasts, which can also point to a looming recession. The accounting season picks up on Tuesday with numbers from Microsoft, General Electric, Johnson & Johnson and Lockheed Martin. Also in the following days, the focus is primarily on large companies in the USA. Investors are eagerly awaiting Tesla’s numbers on Wednesday. “Recent price declines do not indicate strong demand,” said Neil Wilson, chief analyst at online brokerage Markets.com. Airbus arch-rival Boeing also opens its books in the middle of the week. For Thursday, the results from the Dax companies SAP and Sartorius as well as the American credit card providers Mastercard and Visa are on the agenda. At the end of the week, Intel, Chevron, American Express and Colgate-Palmolive will present their numbers.
Investors are watching for signs of a recession
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