Advertisement
Advertisement

Marketmind: Transatlantic split

By:
Reuters
Published: Jan 28, 2022, 08:08 UTC

A look at the day ahead from Sujata Rao.

A sign in front of Department of Commerce building is seen before an expected report of new home sales numbers in Washington

A look at the day ahead from Sujata Rao.

After U.S. Q4 GDP came in at an annualised 6.9%, the highest since 1983, could Europe go one better? Yes and no.

France just posted data showing the economy in 2021 expanded at the strongest rate in 52 years at 7%. Sweden too beat expectations at 6.4%. German growth meanwhile is expected at a more sedate 2.7%.

The wait is on.

In any case, not much relief for the euro, which is heading for its biggest weekly loss against the dollar since last June, and could tumble below $1.11 for the first time since mid-2020. The promise of an aggressive Fed rate rise campaign and a slew of buoyant economic data have boosted the dollar index almost 2% so far this week.

As usual, reasons for the U.S.-Europe split can be seen in “real” bond yields. After stripping out inflation effects, U.S. 10-year yields now stand at minus -0.5%, double end-2021 levels, while its German equivalent languishes around -1.8% .

While Wall Street ended with losses again on Thursday, Apple posted record holiday-quarter sales, having skirted the supply chain problems that have bedevilled rivals. Shares jumped 5% after-hours, but with the world’s biggest company down almost $400 billion from peak value, will more buyers emerge?

Aside from the European growth, markets will await core U.S. PCE, the Fed’s favoured inflation gauge, to see if price growth is peaking. Expectations though are for a pick-up to 4.8%, which would be the highest reading since 1983.

As for stock markets, futures are again pointing north after a bounce across Asia. Here at least Europe appears more resilient, having managed to end firmer on Thursday. The pan-European STOXX index is down 3.5% this year (-9% at the S&P 500) while Britain’s FTSE is actually in the green.

GRAPHIC: Apple market cap, https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrjrlyvm/Pasted%20image%201643320036979.png Key developments that should provide more direction to markets on Friday:

-Italy’s UniCredit reports better-than-expected full-year revenues and profit

-Portuguese snap election points to rocky road ahead

-Euro zone consumer and business sentiment

-Emerging markets: Colombia expected to raise interest rates

-U.S. core PCE index Dec/University of Michigan inflation expectations

-U.S. earnings: Chevron, Caterpillar, Colgate Palmolive

-European earnings: Caixabank, Unicredit, H&M, Electrolux, Volvo, Telia, Svenska Celulosa

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

About the Author

Reuterscontributor

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV. Learn more about Thomson Reuters products:

Did you find this article useful?

Advertisement