North American News
US equities post another solid day, led by tech stocks
Closing changes in North American equities:
- S&P 500 +0.5%
- Nasdaq +1.3%
- Russell 2000 +0.8%
- Toronto TSX Comp +0.1%
On the week:
- S&P 500 +2.7%
- Nasdaq +4.6%
- Russell 2000 +2.7%
- Toronto TSX Comp +1.1%
US December PCE core inflation +4.4% vs +4.4% expected
- Highlights of the Fed’s personal consumption expenditure report for December 2022
- Prior was +4.7%
- PCE core MoM +0.3% vs +0.3% expected
- Prior MoM +0.2%
- Headline inflation PCE +5.0% vs +5.5% prior
- Deflator MoM +0.1% vs +0.1% prior
Consumer spending and income for November:
- Personal income +0.2% vs +0.2% expected. Prior month +0.4%
- Personal spending -0.2% vs -0.1% expected. Prior month +0.1%
- Real personal spending -0.3% vs +0.0% prior
The Fed might not like seeing services inflation up 0.7% m/m. That’s counteracted by a 1.0% decline in goods prices, including -2.3% in durable goods. Powell has expressed worry about core services inflation remaining high and said that’s why they plan to hike to 5.00-5.25% and stay there.
UMich final January consumer sentiment 64.9 vs 64.6 expected
- The final reading on January US consumer sentiment
- Prelim was 64.6
- Prior was 59.7
- Current conditions 68.4 vs 68.6 prelim
- Expectations 62.7 vs 62.0 prelim
- 1-year inflation 3.9% vs 4.0% prelim (4.4% prior)
- 5-10 year inflation 2.9 % vs 3.0% prelim (2.9% prior)
US December pending home sales +2.5% vs -0.9% expected
- US December 2022 pending home sales data
- Prior was -4.0% (revised to -2.6%)
- Index 76.9 vs 73.9 prior
- This is the first improvement since May
Commodities
Gold slips after US PCE and UoM Consumer Sentiment
- US Dollar climbs as the Federal Reserve preferred gauge for inflation, with core PCE creeping lower.
- According to the University of Michigan (UoM) poll, US consumers’ inflation expectations edged lower.
- Gold Price Analysis: The rally from $1,616.71 to $1,949.16 could end, as a doji emerged in the weekly chart.
Gold price falls for the second consecutive day, but it remains above January’s 26 low of $1,918.74 and stays sideways, following the release of inflation data in the United States (US). The US Dollar (USD) shortened its drop during the week, while US Treasury bond yields are rising, two additional reasons behind Gold’s loss of its brightness.
US consumers estimate inflation would ease below 4%
Later, the University of Michigan (UoM) Consumer Sentiment on its Final reading exceeded estimates of 64.6 and rose by 64.9. The survey conducted by the University of Michigan updated inflation expectations, with a one-year horizon estimated at 3.9%, while for a 5-year rose to 2.9% compared to the preliminary 3.0%,
Gold pressured by high US Treasury bond yields
Meanwhile, US Treasury bond yields continue to be headwinds for Gold. The US 10-year Treasury bond yield continues to edge higher, almost four bps, and yields 3.540%, underpinning the greenback. The US Dollar Index (DXY), which tracks the buck’s performance against a basket of six peers, advanced 0.22%, and reclaimed the 102.000 mark at 102.051.
Oil bulls continue to run into sellers ahead of $83
- Tough nut to crack
Every time oil hits $83 and fades, the importance of that level grows.
The WTI crude oil market has been knocking on the door of that level all week long but was once again beaten back today in a quick fall to $80.22. Just yesterday the oil market finally tilted into backwardation again and that gave the bulls a reason to buy but $83 is putting up a stiff fight.
EU News
European equity close: Another week of gains but the momentum slows
On the day:
- Stoxx 600 +0.2%
- German Dax flat
- France’s CAC -0.1%
- UK’s FTSE 100 flat
- Spain’s Ibex +0.2%
- Italy’s FTSE MIB +0.8%
On the week:
- Stoxx 600 +0.6%
- German Dax +0.7%
- France’s CAC +1.3%
- UK’s FTSE 100 -0.2%
- Spain’s Ibex +1.5%
- Italy’s FTSE MIB +2.5%
Other News
Fed to hike 25bps; the bar is high to flip the status quo for USD – TD
- The FOMC decision is on Wednesday
TD Research discusses its expectations for next week’s FOMC policy meeting.
“We expect a 25bp rate hike at next week’s FOMC meeting taking the Fed funds target range to 4.50%-4.75%, and raising the IOER and RRP rates to 4.65% and 4.55%, respectively. The move would be the second consecutive downshift in hiking pace by the Fed. Despite this, we expect that post-meeting communication to emphasize that the Fed is not done yet in terms of further tightening of its policy stance, and signal that more rate hikes are still in the pipeline,” TD notes.
Elon Musk faces SEC probe for role in Tesla self-driving claims
- The regulators need to look in the mirror
There is going to be some kind of reckoning around claims about ‘self-driving’ and robotaxis. Elon is currently in a lawsuit that’s in court right now about his ‘funding secured’ tweets and he’s a guy who has pushed the limits of truth.
Consumer Reports this week ranked Tesla’s driver assistance features as 7th among car makers and his competitors certainly aren’t calling theirs ‘self-driving’. There’s a matter of truth in advertising here and I don’t think adding ‘beta’ to the end of it changes that. But if I were Tesla, I’d make the claim that it was ignored by regulators for so long as it’s tantamount to endorsement that the strategy was legal.
In any case, this market no longer cares about reality or fundamentals, it’s all momentum and options activity. Shares of Tesla are up 11% in back-to-back days.
Cryptocurrency News
UK’s FCA hands over crypto companies that applied for regulatory approval to law
- UK’s Financial Conduct Authority has approved 41 out of 300 applicants and referred some firms to law enforcement agencies.
- FCA says that these firms have likely engaged in financial crime, as UK toughens crypto stance.
- The debate on crypto regulation in the UK is an ongoing one with Transparency Bill being debated in the parliament.
UK’s Financial Conduct Authority (FCA) is a regulatory body that oversees financial markets and firms in the country. The FCA is focused on protecting customer funds and ensuring integrity of financial systems. It recently referred several crypto firms that applied for regulatory approval to law enforcement agencies.
UK’s FCA has taken a tough stance towards crypto firms and regulatory approval applicants
The Financial Conduct Authority of the UK has the power to authorize and supervise firms in the financial sector. The FCA welcomed applications from crypto companies for regulatory approval in the UK.
Interestingly, of 300, only 41 applications were approved. The regulator further referred some of these applicants to law enforcement agencies for an investigation into financial crime or a direct link to organized crime.
Sarah Pritchard, executive director of markets supervision, policy and competition at the FCA said in a letter to the Treasury Select Committee,
Overall, in the small number of cases where we have identified likely financial crime or direct links to organized crime we have referred these to law enforcement agencies. Some of those law enforcement investigations remain ongoing.
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