Stocks are on the slide once again, as fears of prolongued periods of high interest rates cast aside recent optimism on falling inflation. However, todays improved US data does help ease some of the fears that we could be facing a sharp economic collapse this month, says Joshua Mahony. Markets slump, although the dollar struggles to follow through “The bears have re-emerged after a near three-week period of hibernation that allowed the DAX to push an impressive 10% higher. However, US markets appear to have led the drive lower, with the Tuesday declines on the other side of the pond feeding through into Europe yesterday and today. Fortunately for the FTSE 100, we continue to see the declines in GBPUSD provide some protection to the index. However, we are yet to see any major appreciation for the dollar despite this week’s equity losses, with the sharp declines in US inflation signalling the potential for a relatively resilient outlook for the likes of EURUSD and GBPUSD. In the absence of any major resurgence for the dollar, we continue to see strength for the likes of Gold and Silver. ” US data improves, alleviating economic fears somewhat “Improved economic data out of the US has helped highlight a relatively resilient economy despite mixed earnings reports thus far. Unemployment claims dropped to the lowest weekly reading in eight months, easing fears of a sharp uptick in unemployment as recessionary pressures take hold. The typical relationship between economic growth and unemployment looks to be cast aside on this occasion, with the US economy entering this period in an environment where employers had struggled to fill their roles. Meanwhile, the rise in Philly Fed manufacturing survey brings about a five-month high for the economic gauge. Coming off the back of a collapse in the Empire state figure in New York, this does at least allay some fears that the manufacturing PMI will follow suit next week. ”

Stocks continue to consolidate after the recent rebound, as Wall Street continues to debate the outlook for Q4 earnings season and future Fed moves. According to the latest data from FactSet, insiders expect the S&P 500 to report a year-over-year decline in Q4 earnings of -3.9%, which if realized would be the first quarterly loss since Q3 2020. Banks earnings Goldman Sachs and Morgan Stanley capped off big bank earnings yesterday with both taking a hit in their investment banking operations, similar to other Wall Street firms that reported last Friday. Goldman, which reported a whopping -69% decline in profits, was further pressured from the roughly $1 billion that the bank set aside in loan-loss provisions and a nearly $2 billion loss in its consumer banking division. Morgan Stanley saw a similar plunge in investment-banking revenues but did manage to deliver a smaller profit decline (-40%) than analysts had been expecting thanks to a record quarter for its trading desk. While some banks in Q4 fared better than others, bears overall see signs of trouble in the additional +$3 billion that Wall Street banks collectively set aside to cover loans that might go bad amid a potential US recession in 2023. Bulls vs bears Bears believe the economy and corporate profits are at risk from both recession and elevated inflation in 2023 and warn that Wall Street is still underestimating the damage such a double-whammy will inflict. Bulls continue to point to growing signs of decelerating price gains and slower job growth that they believe will pull inflation back toward the Fed's target rate faster than stock bears anticipate. Bulls however are still struggling to justify higher stock prices in the short-term as the Fed's tightening program and elevated inflation look set to continue against a backdrop of weaker consumer and business spending. Investors are also now facing the possibility of a prolonged fight in Washington over the debt ceiling. Treasury Secretary Janet Yellen warned last week that the agency will begin taking “extraordinary measures” after the US reaches its $31.4 trillion debt limit on Thursday. Yellen warned Congress that the debt ceiling will need to be lifted by early June when the Treasury expects to exhaust its cash and the extraordinary measures, though experts say the government can likely make it to August before any type of shutdown. So it's not an immediate crisis but as the deadline approaches, investors will likely start to grow more nervous and see it as yet another unwelcome risk. In conclusion Today, investors will be digesting a slew of economic data, including the Producer Price Index, Retail Sales, Industrial Production, Business, the NAHB Housing Market Index, and the Fed's Beige Book. On the earnings front, Alcoa, Charles Schwab, Discover, JB Hunt, Kinder Morgan.

A second day of losses for the Dow comes as investors watch some worrying weakness in retail sales, says Chris Beauchamp, chief market analyst at online trading platform IG. Stocks turn lower again “Markets are quite happy to see inflation weaken, but the sight of weaker US retail sales is certainly not music to their ears. With earnings season only just hitting its stride, such weakness in economic data bodes poorly for corporate results, at least in coming quarters. In addition, comments from Fed member Bullard suggest that we haven’t quite seen the death of the 50bps rate hike, and that it might be better to err on the side of caution.” Slowing inflation still offers best hope of a rally “Stocks continue to wonder where the next driver of a bounce comes from. For the moment it seems that investors are going to remain fixated on inflation. But with allocations to US stocks at two-decade lows there is the chance of at least a first-half rebound if earnings are overall better than expected. But with the Nasdaq struggling in recent days it seems investors need a lot more convincing.”

Gold price is on a three-day corrective decline as the US Dollar recovery gathers strength. United States Retail Sales and Producer Price Index data eyed for fresh impetus. The USD/JPY upsurge powers the US Dollar, but US Treasury bond yields plunge. Gold price sees downside opening up as the 4H technical setup turns bearish. Gold price is extending its correction from nine-month highs into the third straight day this Wednesday. Gold price is undermined by resurgent United States Dollar (USD) demand, despite the sell-off in the US Treasury bond yields. Investors brace for the critical United States Retail Sales and Producer Price Index (PPI) data slated for release later in the day. United States Retail Sales and Producer Price Index data up next   The United States Dollar is firming up early Wednesday, continuing its recovery momentum from seven-month troughs reached at the start of the week. A sense of caution prevails as investors eagerly await the United States Retail Sales and Producer Price Index (PPI) data for fresh insights on the US Federal Reserve (Fed) future policy course. The US Retail Sales are foreseen at 0.1% MoM in December vs. -0.6% previous, while the Core figure is expected to drop 0.7% MoM in the reported period. Meanwhile, the US Producer Price Index is expected to ease to 6.8% and -0.1% on an annualized and monthly basis, respectively. The US economic data releases will provide further evidence that the Federal Reserve needs to slow down its tightening pace amid growing risks to consumer demand. The CME FedWatch Tool shows a 95% probability of a 25 basis points (bps) February Fed rate hike, followed by another 25 bps in March, which stands at around 78%. Weak United States macro data could check the US Dollar's correction, motivating Gold bulls to fight back for control. However, the sentiment on Wall Street will play a pivotal role, as corporate earnings remain on the agenda, especially after some financial companies' results disappointed on Tuesday. US Dollar rallies with USD/JPY post-Bank of Japan verdict In the meantime, the US Dollar strength will continue to dominate and keep the Gold price on the defensive. The US Dollar follows the massive upsurge seen in the USD/JPY pair after the Japanese yen collapsed on the Bank of Japan's (BoJ) decision to maintain key rates alongside its yield control policy. In doing so, the BoJ defied the market pressure to tweak its yield framework after a few days of the Japanese government bond yields (JGB) topping the 0.50% cap widened by the central bank at its December policy meeting. The BoJ inaction has triggered an explosion in the global bond market, triggering turmoil in the US Treasury bond yields across the curve. The 10-year JGB yields are down 13.5 bps at 0.365%, down 27% on the day. Gold price technical analysis: Four-hour chart After defending the $1,900 mark on Tuesday, Gold buyers have given up control, as the price yields a downside break of a symmetrical triangle on the four-hour chart. Gold price breached the rising trendline support at $1,907 on a four-hourly candlestick closing basis, validating the triangle breakdown. The Relative Strength Index (RSI) has pierced the midline for the downside, suggesting that the tide has turned in favor of bears. Therefore, the downside remains exposed toward the $1,870 previous critical support should the bullish 50- Simple Moving Average (SMA) at $1,890 cave in. On the flip side, recapturing the triangle support-turned-resistance is critical to resuming the recent uptrend. The next key upside target is seen at the mildly bullish 21SMA at $1,911, which coincides with the triangle resistance. Gold price could accelerate toward the $1,920 round figure on a sustained bullish momentum.  

In today's live stream, Coach shared his line in the sand on Cable. He also revised his short term view on Silver with $25.50 being viable.

It might be a day away, but the BoJ still holds sway as markets fret about the BoJ's highly uncomfortable position, which is likely holding global markets hostage. Global shares are trading mixed after a quiet session for overseas markets because Wall Street was closed for a public holiday. China's GDP came in a bit higher than expected but was received by the sound of crickets as traders care less about backward-looking data during China's reopening process. Instead, they are now focusing on-the-spot proof in the economic pudding where retail sales laid an egg. However, on the flip side, China's industrial engines are still revving up in conjunction with the grand reopening as industrial production came ahead of expectations. So, a bit of saw off in most folk's books. Asia markets have become a tad less enthralled after the PBoC failed to lower the MLF rate while reaffirming its pledge to keep policy "targeted and forceful" this year. And with local FX traders expecting growth to drive the next leg lower in USDCNH, they, too, were less enamoured by the lack of a rate cut. In addition, they were less enthusiastic about Chinese consumers keeping their purse strings taught. Bank of Japan Last Thursday and Friday (12th/13th Jan), there was a profound JGB selloff following a local paper Yomiuri Shimbun, which reported that the BoJ would review YCC's side effects at this MPM. The BoJ responded by conducting its most significant single-day YCC purchases, buying JPY 6trn (EUR 43bn) of JGBs over the two days.  Prolonged daily purchases of this scale seem untenable, increasing the risk of an imminent policy change. And this is not even accounting for the Rinban auctions through which they purchased even more bonds. Additionally, when the BoJ widened the 10y JGB yield target band on 20th Dec, one of their explicit goals was to "Encourage a smoother formation of the entire yield curve." However, the 10 point of the JGB curve is still in dire need of damage control. Hence this would also suggest the BoJ is likely dissatisfied with its current policy mix.  The likely outcome of any BoJ tightening is further sales of foreign bonds where EGBs are more exposed than USTs; Treasury/Bund tighteners since over the last 12m have seen Japanese investors liquidate much of their UST holdings in the context of profoundly negative FX  Hedged returns. Japanese market participants made net sales of EUR 122bn of USTs in 2022, compared to EUR 23bn for Bunds/OATs/BTPs/DSLs combined. Therefore, there is room for EGB underperformance.