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The strength on the financial markets continued in the past trading week. The US stock indices S&P500 and Nasdaq100 look back on the best week since November 2022. The fact that inflation rates in the USA are still falling and that the danger of further increases in inflation rates seems to have been averted for the time being caused investors to act more bullishly and flock 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 upwards on Thursday evening. In the late evening hours of the following day (January 13), there was a veritable price explosion on the crypto market.
Bitcoin price shot north within a few hours of trading, initiating a liquidation cascade of more than $500 million in leveraged short positions. As a result, the cryptocurrency peaked at $21,321, dragging the entire crypto sector higher with it. As a result, the total market capitalization has been able to recapture the psychological mark of 1 trillion US dollars for more than two trading months. In the new trading week, the US reporting season with numbers from Netflix continues to pick up speed. Better-than-expected quarterly results from the major US banks JP Morgan, Citibank and Wells Fargo ensured a sustained friendly mood among investors on Friday.
These events are the focus of market participants
With a view to the important economic data, the new trading week only really picks up speed on Tuesday because of Martin Luther King Day in the USA. Fresh economic data from the People’s Republic of China will start things off. Midweek, 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 then also watch the publication of the ECB meeting minutes from the last interest rate meeting in December. At the end of the week, investors are focusing on the development of the US real estate market.
Gross domestic product and industrial production in China open the new trading week
Tuesday, January 17, 2023: Investors are initially looking to the Far East this week. In the early hours of the morning (3:00 a.m. CET), the current gross domestic product for the final quarter of 2022 and new figures for industrial production for the previous month of December will be published in China. Based on the GDP data from China, market experts hope to draw conclusions about the situation in the second largest economy in the world. After a recovery in the last trading quarter, the experts are forecasting lower growth again for the fourth quarter. While the growth rate in the previous quarter was still 3.9 percent, the analysts are now assuming 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 sealed off again in the underlying calculation period due to the increased number of infections.
If the decline is less severe than expected, investors should take this positively and, contrary to expectations, China may have exported more to the USA and Europe than assumed. That would be an indication that the situation on the world markets could have eased further. Market participants are also looking at the development of industrial production for the past month of December. Industrial production measures the change in the industrial output of producers, 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 on 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, January 18, 2023: The Office of National Statistics releases the latest inflation data for December at 08:00 (CET). A slight decline from last 10.7 percent to 10.6 percent compared to the same period of the previous year is expected. If the forecasts of the market analysts are confirmed and the inflation rate 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 appreciate against the US dollar. As in the past, this could have a positive effect on the stock and crypto market. On the other hand, should the consumer indices turn out higher than expected, this would be a warning for the financial market and the US dollar could regain strength. For Bitcoin and Co. that would be bearish.
US producer prices and retail sales provide new insights into the US economy
Wednesday, January 18, 2023: New US producer prices (PPI) for the past month of December will follow at 2:30 p.m. (CET). The market experts are forecasting a month-on-month decline from the most recent 0.3 percent to -0.1 percentage points. If price increases should fall again in November after producer prices have recently risen again, the strength of the US dollar should decrease further and lead to a bullish price reaction on the financial markets. However, if inflation in producer prices remains high and exceeds analysts’ expectations, as was the case in the last calculation period, this could lead to falling prices on the market. The crypto market should not be spared either.
At the same time, at 2:30 p.m. (CET), the core rate of retail sales in the USA for the month of December will be presented. Most recently, sales in the US retail trade were again in negative territory at -0.2 percent, confirming the continued reluctance of private households to spend. At -0.4 percent, the analysts expect retail sales to continue to decline. If the published numbers are even below the experts’ defensive estimates, the pressure on the Fed could increase further. Recently, weak retail sales have had a negative impact on stock market prices as well as in the crypto sector. If this trend persists, the mantra of “bad news is good news” could be reversed again. On the other hand, if the retail sector was able to increase its sales in the run-up to Christmas against expectations, investors should rate this positively, since the US reporting season that is starting from Amazon, Apple and Co. could also turn out better than expected. A positive price reaction on the financial markets would 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.
ECB meeting minutes provide insights into European Central Bank position
Thursday, January 19, 2023: At 1:30 p.m. (CET), the top monetary watchdogs in the euro zone will present the transcript of the last central bank meeting on December 15. Market watchers will examine the minutes of the previous ECB meeting for deviations from Ms. Lagarde’s current interest rate policy in order 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 a less restrictive monetary policy from the world’s most important central banks.
US Existing Home Sales released
Friday, January 20, 2023: At 4:00 p.m. (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 the current consumption level of the citizens. Higher-than-predicted sales indicate rising consumer spending in the US. If house sales of existing properties should fall short of market analysts’ expectations, as has recently been the case, this would be confirmation of the increasing cooling of the housing market, which is so important for the USA. The expert forecast for December, with 3.95 million house sellers, is below the mark of 4 million sales of existing properties for the first time in over two years. If the published figures reach the forecast value or are even lower, a further weakening of the US dollar is to be planned. It remains to be seen whether this significant cooling off in the housing market will have a positive effect on the stock and crypto market, as it did in 2022. Bad news from the real estate sector, like weak retail sales, could 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.