Investors Watching U.S. Earnings Reports and Awaiting FOMC Meeting Results

January 26, 2021

There continued to be a lack of definitive market direction on Tuesday. A two-day policy review by the Federal Open Market begins today. In Congress, members of the House of Representatives delivered their impeachment edict to the senate, but a trial will not begin in earnest until February 9 in order to allow confirmation of Biden cabinet appointees to happen in a timely way. Republican support for convicting Trump is becoming increasingly scant. Senate Majority Leader Schumer doesn’t expect the next fiscal stimulus before mid-March, and Minority Leader McConnell will not use the filibuster option at least for now. The fourth-quarter corporate earnings season is kicking off this week and being watched closely.

On the Covid pandemic front,

  • Global cases went over the 100 million mark, including over 25 million plus in the U.S..
  • There’s been a bit of a slowdown in daily cases and deaths. Yesterday’s U.S. figures on that score were 155k and just below 1,800, respectively.
  • Frustration continues over the implementation of vaccines in most countries.
  • Variants of both the British and Brazilian more infectious coronavirus mutations have been identified in the United States. They are suspected of being more lethal, too.

Stock markets seemingly can’t make up their mind on the next direction to go. Tuesday saw share prices plunge 2.6% in Hong Kong, 1.`% in South Korea, 1.9% in Indonesia, 1.8% in Taiwan, 1.5% in China and 1.0% in Japan. Alternatively, equity prices so far are up 1.9% in Germany, 1.2% in Spain, 1.1% in Italy, 1.0% in France and 0.8% in the U.K., while U.S. futures suggest little change at the future.

The dollar is mostly lower but in a very orderly way, with its trade-weighted index off just 0.1%. On a bilateral basis, the dollar is unchanged against the yen and euro but down 0.6% versus the kiwi, 0.4% relative to the Mexican peso, 0.3% vis-a-vis the loonie and Australian dollar and 0.2% against sterling and the Chinese yuan.

Among commodity prices, WTI oil has risen 0.6%, and gold is unchanged today.

Ten-year U.S. Treasury and British gilt yields are up two basis points, while their German counterpart has edged a basis point higher.

Holiday observances today include Australia Day and India’s Republic Day.

Disappointing British data were released:

  • The CBI distributive trades index nosedived from -3 in December to a 7-month low of -50 in January, far worse than feared and underscored the damage of the economy’s social gathering lockdown.
  • The jobless rate climbed to a 4-1/2 year high of 5.0% in September-November.
  • A year-on-year drop in jobs was the most since early 2010.
  • Average weekly earnings growth accelerated 0.8 percentage points to a 14-month high of 3.6% in September-November.

Consumer confidence in Brazil weakened to a 7-month low in January and a 5-month low in Taiwan.

New Zealand’s service sector purchasing managers index printed below the 50 expansion-or-contraction threshold for a second straight month in December but indicated a slower rate of deterioration than in November.

Mexico again experienced fewer retail sales in November than a year earlier (-5.1%), but that was the smallest on-year decline since the trend turned negative last March.

Danish retail sales suffered a record monthly drop of 7.7% in December, which slashed the 12-month rate of increase to 1.0% from 6.2% in November and 13.7% in October.

South Korean real GDP advanced 1.1% last quarter, only half the pace in the third quarter of 2020. On-year growth became more negative at -1.4%.

Factory output in Singapore rose 14.3% on year in December and recorded an average increase of 7.3% in 2020.

Hong Kong’s trade deficit in December was the smallest in 18 months. There was a HKD 340 billion deficit in 2020 as a whole, equivalent to roughly $43.8 billion in the former British colony.

Japanese corporate service price inflation was negative in December for a third straight month at -0.4%.

Swedish PPI inflation of minus 2.7% in December was the least negative since February, and Spanish producer price inflation of -1.4% last month was its least negative since -1.0% in January 2020. Icelandic PPI inflation of 6.3% represented a 4-month low, and Icelandic consumer price inflation accelerated further in January to an 89-month high of 4.3%.

In central banking news today, officials at the Central Bank of Hungary left interest rates unchanged after this year’s first scheduled policy review. The base rate was last changed in July 2020. Last years only adjustments were a pair of 15-basis point cuts in June and July, prior to which the most recent reduction had been in April 2016. The rate is very low at 0.60% currently. Separately, the People’s Bank of China unexpectedly drained some liquidity today. The Chinese Lunar New Year begins in less than three weeks and tends to result in a big increased in demand for cash. Finally as noted above, a 2-day FOMC meeting marking the customarily changed composition of voting members among district presidents begins today.

Two measures of U.S. house price inflation accelerated in November. The Case-Shiller index went up 1.2 percentage points to 9.1%, while the FHFA house price index showed an 11.0% on-year advance versus 10.2% in October.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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