Week in Review: 3-6 January 2023

Summary:

Happy new year and welcome to the first trading week.

A worldwide recession is being forecasted by almost everybody. Some still believe in a soft landing. But nobody really knows. So we'll stay in tune with the news and make our best investments and bets, carefully.

December FED minutes were released, and the aggressive stance continues. Fed policymakers continued to anticipate that ongoing increases in the federal funds rate would be appropriate and that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%. Also, several participants noted that historical experience cautioned against prematurely loosening monetary policy, given the persistent and unacceptably high level of inflation. At the same time, no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023. The Federal Reserve raised the fed funds rate by 50bps to 4.25%-4.5% during its last monetary policy meeting of 2022, pushing borrowing costs to the highest level since 2007, and in line with market expectations. It was a seventh consecutive rate hike, following four straight three-quarter point increases.

The non-farm payrolls showed that the US economy added 223K jobs in December of 2022, the least since December of 2020, after a downwardly revised 256K rise in November, and beating market expectations of 200K. The number of job openings in the United States decreased slightly by 54,000 to 10.5 million in November of 2022, compared with market expectations of 10 million, suggesting the labor market remains strong. Job postings have slowly declined since reaching a peak of 11.9 million in March of 2022. Over the month, the number of job openings fell in finance and insurance (-75,000) and in federal government (-44,000) but increased in professional and business services (+212,000) and in nondurable goods manufacturing (+39,000). Meanwhile, the number of hires was down by 56,000 to 6.1 million, while total separations including quits, layoffs and discharges, and other separations rose by 114,000 to 5.9 million.

The unemployment rate in the US dropped to 3.5 percent in December 2022, falling below market expectations of 3.7 percent and matching the rates seen in September and July, which were the lowest since February 2020. The labor market is strong, but the surveys may not tell the whole story. And the economy is slowing down, no doubt - let's hope it doesn't fall off a cliff!!!

Next week, in the US, center stage will be taken by the inflation rate report, Fed Chair Powell's speech at the Riksbank International Symposium, and the University of Michigan's consumer sentiment.

Economic data source: Trading Economics

 

Some Scenarios for 2023

Video: 7% Interest Rates? Is The Fed INSANE??? | Lance Roberts & Adam Taggart

Channel: Wealthion

Manipulation by Central Banks

Video: THE NEXT PHASE: Central Banks Are About To Do THIS! Are You Ready For It? Mannarino

Channel: Gregory Mannarino

Bitcoin? Or no Bitcoin?

Video: Bitcoin: A Long-Term Buy?

Channel: The Swedish Investor

A Walk Around the Markets

 

OIL

 

Source: Trading Economics

 

WTI crude futures pared earlier gains to close at $73.8 per barrel on Friday, notching an 8% drop on the week as recession concerns outweighed fears of low inventories in the US. Soaring Covid infections in China continued to darken the demand outlook for the top importer despite reopening efforts by authorities. To add, major consumer India expects its economic growth to slow in the current financial year as pent-up demand from the pandemic recovery levels out. Elsewhere, investors continued to assess news that Saudi Aramco slashed crude prices to Asia and Europe in a potential sign of sluggish demand. On the other hand, supply worries eased oils decline toward the end of the week. EIA data showed that US distillate stocks, which include diesel and heating oil, fell by 1.427 million barrels last week despite forecasts for a milder 396,000-barrel drop. US crude and refined product exports also rose by 1.33 million barrels last week, challenging signs of lower foreign demand.

Natural Gas

 

Sources: Trading Economics

US natural gas futures extended losses to below $3.6/MMBtu, the lowest in nearly a year, after a federal report showed a smaller-than-expected storage draw. US utilities pulled 221 billion cubic feet (bcf) of gas from storage during the week ended December 30th, less than market expectations for a 228 bcf drop. Still, that was way more than a decrease of 46 bcf in the same week last year and a five-year (2017-2021) average decline of 98 bcf as colder-than-normal weather prompted consumers to burn lots of gas to heat their homes and businesses. Natural gas prices in the US are down almost 20% this week, the third consecutive week of declines, dragged down by expectations of lower heating demand and the restart delay of the Freeport LNG export plant to the second half of January, leaving more supply on the domestic market.

 

US Stock Markets

 

Source: Trading Economics

US stocks closed sharply higher on Friday, lifting major equity indices enough to book strong weekly gains after a batch of economic data drove investors to ease expectations of aggressive monetary tightening by the Federal Reserve. US wage growth unexpectedly slowed in December and values from prior months were revised sharply lower. To add, ISM data showed that non-manufacturing business activity declined, while factory orders contracted well above expectations. Still, the jobs report showed that the US economy added more jobs than expected for the ninth consecutive month, adding to evidence of stubborn tightness in the US labor market. The Dow Jones added 700 points and the S&P 500 gained 2.3%, both notching gains of 1.4% on the first week of the year. In the meantime, the Nasdaq 100 outperformed and gained 2.8% in the session, rebounding after the hawkish signals from FOMC minutes as 10-year Treasury yields retreated 15bps.

 

Bitcoin

 

Source: Trading Economics

Bitcoin US Dollar traded at 16975 this Sunday January 8th, increasing 43 or 0.25 percent since the previous trading session. Looking back, over the last four weeks, Bitcoin gained 0.77 percent. Over the last 12 months, its price fell by 59.45 percent. Looking ahead, we forecast Bitcoin US Dollar to be priced at 15355 by the end of this quarter and at 11450 in one year, according to Trading Economics global macro models projections and analysts expectations. 

 

 

Gold

 

Source: Trading Economics

Gold prices rose to $1,870 an ounce on Friday, getting back to multi-month highs, as investors digest the latest job report for the US and the impact it could have on the Fed's policy. The American economy added more jobs than expected once again in December, but the gain was the smallest in two years. Also, annual wage growth slowed much more than initially anticipated to the lowest rate since August of 2021. Some market participants seem to see the December report as a dovish one, which weighed on the USD and Treasury yields, benefitting the yellow metal. However, interest-rate futures continue to show a peak Fed policy rate of 5% in May. Meanwhile, inflation in the Eurozone slowed more than anticipated last month due to slowing energy costs but the core rate continued to break fresh records, which is unlikely to change the ECB monetary policy path for now. Considering the first week of 2023, gold added more than 1%.

 

 

Silver

 

Source: Trading Economics

Silver prices fell to below $22.3 per ounce, declining sharply after hovering at the $24 level at the end of December and tracking the decline in precious metals. Signs of market tightness backed hawkish stances by the Fed, strengthening the dollar and driving investors out of non-interest-bearing bullion assets. Prices were also pressured by concerns of lower demand for industrial inputs and electrical conductors after the FOMC warned against markets’ stubborn expectations of a dovish pivot this year, reaffirming projections of higher borrowing costs for longer to curb inflation. In addition, indices tracking equity of solar energy companies booked sharp declines to start the year, pressing the major input silver. Still, looming supply concerns drove silver to outperform gold and palladium in 2022. COMEX inventories fell nearly 70% in the last 18 months to just over 1 million tonnes, and London Bullion Market Association stockpiles fell sharply amid outflows to India.