2023/01/31 (160) Column

Europe
is building muscles again


The stock market professionals are still not sure which market to favor in the new year. Eyes wander between Wall Street, Europe and China. Although not all data is pointing in the same direction, European stocks have come back into focus as the economy as a whole is doing better than expected a few weeks ago.

This is also the view of the investment giant Allianz Global Investors, which titles its weekly stock market analysis with: “How resilient is the recovery in Europe?”. China’s opening-up is expected to lose some focus in the coming days as market activity and liquidity should slow due to the Chinese New Year celebrations. Instead, market participants are likely to focus more on economic dynamics in Europe. Both the euro and/or European stocks have soared since the end of last year. Given the sharp rise in US stock prices, markets have come to expect these stocks to outperform in a market rally. In fact, however, the stock market recovery from the fourth quarter of 2022 has mainly taken place outside the USA.

If you read my DEVISE 2 DAY Affiliate Financial Market Online Newspaper daily, day by day, then you know that, nevertheless, I already dared to sketch a future scenario at the beginning of 2023! And always with the danger of having to rewrite it again tomorrow. At the end of January 2023 and/or at the beginning of February 2023 we still have the following basic 4XSetUps: DOW future long (as a conservative base investment), DAX future long (as a German patriot, without overpriced technology companies from Silicon Valley), incl. EURUSD long (after the FED had already done most of its homework in 2022 – in contrast to the ECB, which still has to do it in 2023). And or also TESLA shares – as a highly speculative admixture. If you go long a maximum of 5% of your portfolio with these 4 4XSetUps, then (from today’s perspective) it should be worth it, more or less, until the end of 2023! Don`t you think so, also?

AllianzGI outlines what has changed from a European perspective as follows.
On the one hand, the valuations are lower, on the other hand, the relative economic momentum has changed. Natural gas prices on a one-year horizon in Europe are still five to six times higher than at the beginning of 2020 and as such continue to pose a structural problem for some sectors of European industry. However, compared to the peak in August last year, they are already down down again by two-thirds. Given the recovery in the ZEW economic index, AllianzGI expects business surveys in the euro area to be even better in the coming months. In the further course, the prospects for an upturn in economic momentum are likely to depend on a rapid turnaround in core inflation in the euro area. Markets are now optimistic that inflationary pressures could fundamentally ease. However, the European Central Bank has repeatedly warned against overly optimistic assessments of inflation and interest rates. Because the ECB is likely to continue its restrictive monetary policy until the summer of 2023 – in contrast to the FED (which had already done most of its homework in 2022). Why should the tightening of monetary policy continue, EURUSD should continue to move towards EURUSD 1.20 instead of falling back towards parity…DEVISE 2 DAY 48h
– My Last Thoughts Abot Market Price Actions

It will be a very busy week with central banks meetings in US, UK, and Euro Area and/or US non-farm payrolls report taking central stage. Also, investors will follow inflation and GDP growth rates for major European economies including Germany, France, and Italy. Finally, it will be worth following fresh PMI readings for the US, China, Canada, India, Australia, and South Korea.

In addition, there is also the strongest week in terms of quarterly reports, on the US Wall Street. It will be and is one of the most groundbreaking weeks of this year 2023! And that already in the fifth calendar week of 2023.

However, DOW Future long (as a conservative base investment), DAX Future long (as a German patriot, without overpriced technology companies from Silicon Valley), incl. EURUSD long (after the FED had already done most of its homework in 2022 – in contrast to the ECB, which still has to do it in 2023). And/Or also long TESLA shares – as an highly speculative admixture. If you go long, please only with a maximum of 5% of your portfolio with these four 4XSetUps. And that only from today’s perspective. It should be worth, more or less, until the end of 2023! Don`t you think so? More every day – today also.
DEVISE 2 DAY Another 48h
– Some Last News About Market Price ActionsAsian equity markets fell on Tuesday as caution dominated sentiment ahead of key policy decisions from major central banks this week, headlined by an expected interest rate hike from the US Federal Reserve on Wednesday. Investors also digested a raft of mostly positive regional data, with Chinese manufacturing and services activity beating expectations and returning to growth in January as the country ended its zero-Covid policy. Shares in Australia, Japan, mainland China, Hong Kong and South Korea all declined.

China Stocks Ease Amid Strong Data
Australian Shares Fall on Tech, Lithium Rout
India Shares Set to End Month on Downbeat Note
Japanese Shares Slip on Fed Jitters
Hang Seng Down for 2nd Day But Posts Strong Gains

China Stocks Ease Amid Strong Data
The Shanghai Composite fell 0.1% to around 3,266 while the Shenzhen Component dropped 0.3% to 12,050 on Tuesday, retreating slightly from multi-month highs as investors assessed stronger-than-expected Chinese data which reduces pressure on authorities to keep policy accommodative. Latest data showed that China’s manufacturing and services sectors unexpectedly returned to growth in January as the country’s abrupt exit from zero-Covid policy lifted economic activities. Consumer-related and technology stocks led the decline, with notable losses from Wuliangye Yibin (-2.7%), Kweichow Moutai (-1.5%), iFLYTEK (-4.2%), Beijing Join-Cheer (-1%) and China National Software (-3.9%). Meanwhile, new energy stocks extended recent gains, including BYD Company (1.8%), Contemporary Amperex (1%) and Longi Green Energy (1%).

Australian Shares Fall on Tech, Lithium Rout
The S&P/ASX 200 Index fell 0.07% to close at7,477 on Tuesday, sliding for the second straight session as technology and lithium stocks faced heavy selling pressure ahead of expected interest rate hikes from major central banks this week. Investors also assessed a slew of Australian economic data, with retail sales in the country declining more than expected in December, while private sector credit grew at the weakest pace in 20 months. Losses in the technology sector were led by Xero (-1.1%), Rea Group (-1.4%) and Block Inc (-3.1%). Megaport also plunged 25% after the communications infrastructure provider fell short of expectations in terms of business growth. Lithium stocks fell sharply as well, including Pilbara Minerals (-5%), IGO Ltd (-7.1%) and Allkem (-7.5%).Meanwhile, healthcare, retail and other consumer-related firms resisted the market selloff.

India Shares Set to End Month on Downbeat Note
The BSE Sensex dropped 182.8 points or 0.3% to 59,317.6 in morning trade on Tuesday, falling back to its lowest level in over 3 months after ending higher Monday while pointing to a 3.2% slump monthly, due to short seller’s fraud allegations on India’s Adani Group. The index also tracked a weak session on Wall Street overnight ahead of US Fed’s monetary policy decision this week and amid anticipation of the Union budget with traders looking for any incentives to attract foreign investors. India is set to peg GDP growth at 6-6.8% for 2023-24, the slowest in 3 years, at its pre-budget economic survey, Reuters said. A slump in Adani Group’s stocks extended for the fourth session, as losses reportedly widened to USD 74 billion despite reports that a key investor from Abu Dhabi subscribed to Adani Enterprises’ share offer. Among bottom movers were Tech Mahindra (-3.2%), Britannia (-2.5%), and Bajaj Finance (-1.6%). Axis Bank was down 0.3%, due to exposure to Adani’s corporate bonds.

Japanese Shares Slip on Fed Jitters
The Nikkei 225 Index fell 0.39% to close at 27,327 while the broader Topix Index lost 0.36% to 1,975 on Tuesday, with Japanese stocks facing pressure ahead of key policy decisions from major central banks this week, headlined by an expected rate hike from the US Federal Reserve. Investors also digested a slew of mostly positive Japanese data, with the country’s unemployment rate holding steady in December, while retail sales and industrial production data came in better than anticipated. Technology stocks led the market lower, with notable losses from Tokyo Electron (-1.4%), Keyence (-1.3%) and Advantest (-2.3%). Financial and healthcare stocks also declined, including Mitsubishi UFJ (-2.8%), Hoya Corp (-2.3%) and Daiichi Sankyo (-4.9%). Meanwhile, Oriental Land gained 3.5% after the Disney operator forecasted an eightfold annual profit increase due to a travel rebound, while Socionext jumped 5.1% after issuing a strong guidance.

Hang Seng Down for 2nd Day But Posts Strong January Gains
The Hang Seng slipped 227.40 points or 1.03% to close at 21,842.11 on Tuesday, extending losses from the prior session and retreating further from its highest level in 9-1/2 months hit recently, with all major sectors suffering notable losses as major central banks will deliver policy announcements this week, including the US Fed. Meantime, official data showing China’s economic activity bouncing back in January failed to boost sentiment, as pressures on Chinese chip makers likely increase after US President Joe Biden won international support for limiting the flow of advanced technologies to the world’s second-biggest economy. China Resources Land slumped 4.3%, Wuxi Biologics shed 3.8%, and Tencent Hlds. lost 1.2%. Still, markets soared 8.3% for the month, their best January performance since 1989, boosted by an accelerated recovery in the mainland after President Xi Jinping suddenly removed strict pandemic measures, as well as Beijing’s accommodative fiscal and monetary measures.

European Equity Markets Edged Down On Tuesday
European equity markets edged down on Tuesday, extending losses for the second consecutive session as investors awaited key policy decisions from major central banks this week and digested a batch of economic data and corporate earnings. The benchmark Stoxx 600 lost 0.2% mainly due to basic resources stocks. On the other hand, banks closed almost 1% higher, after UniCredit and UBS reported better-than-expected results. Domestically, the German DAX was little changed, after data showed Germany’s retail trade tumbled 5.3% in December. On the corporate front, German arms maker Rheinmetall dropped more than 5% following the launch of a convertible bond offering. Other data showed the Eurozone economy unexpectedly grew 0.1% in Q4, the least since the first three months of 2021. Investors now await both the ECB and BoE to announce a 50 bps interest rate increase on Thursday, while policymakers in the US are seen delivering a 25 bps hike on Wednesday.

Spanish Ibex Falls 2nd Session, But Rallies 9.4% Over Month
French Stocks End Flat
Italian Shares Outperform on Bank Results

Spanish Ibex Falls 2nd Session, But Rallies 9.4% Over Month
The Ibex 35 dropped by 0.17% to 9034 on Tuesday, falling for the second session and tracking its peers lower, as investors remained cautious ahead of key monetary policy and digested earnings reports and fresh economic data, showing the Eurozone unexpectedly grew in Q4. On the corporate front, stocks traded in the mix. Unicaja shares were the biggest laggard, losing nearly 10%, after it reported a net loss of EUR 1 million, compared to expectations of EUR 38 million profit in the final quarter of 2022. Acciona Energía un (-2,29%) and Bankinter un (-1,85%) also registered significant losses. On the other hand, Banco Sabadell was the top performer (+3.46%). Traders now await the reports on BBVA, CaixaBank, and Banco Santander accounts, due later in the week. Over the month, the index has rallied 9.4%.

French Stocks End Flat
The french CAC 40 index closed virtually unchanged at 7,082 on Tuesday, tracking a general cautious mood ahead of crucial monetary decisions from the Fed, ECB and BoE. Meanwhile, investors digested a batch of economic data and corporate earnings from Europe and the US. Both the Eurozone and the French economy advanced 0.1% in the fourth quarter, beating market forecasts while inflation in France accelerated slightly to 6% from 5.9% and retail sales in Germany sank in December. Meanwhile, a new wave of strikes to protest against the French government’s plans to raise the retirement age to 64 caused severe disruptions across the country, impacting transport links and electricity production. Among single stocks, Stellantis (+2.6%), Societe Generale (+2.5%) and Pernod Ricard (+2%) posted the biggest gains; while ArcelorMittal (-1.9%) underperformed. The CAC 40 experienced the best month of January in its history thanks to a gain of 9.4%.Italian Shares Outperform on Bank Results
The FTSE MIB index jumped by 1% to 26,605 on Tuesday, closing at its highest since mid-February to sharply outperform its European counterparts with support from strong corporate earnings, while investors digested a batch of key economic data. UniCredit shares soared by 12.3% after the bank released its fourth-quarter results. Besides posting record profits in the period, Italy’s second-largest lender pledged to raise its shareholder payout by 40% to EUR 5.25 billion. The move triggered a rally for Milan’s heavy-weighing financial sector, with BPER Banca and Intesa Sanpaolo adding 3.6% and 2.8%, respectively. On the data front, Italy’s GDP shrank 0.1% on quarter in the three months to December 2022, swinging from a 0.5% expansion in the previous three-month period and compared with market forecasts of a 0.2% decline. In the meantime, the Eurozone GDP unexpectedly showed a slight expansion. Still, domestic unemployment remained at its lowest since April 2020.

The ruble-based MOEX Russia index extended early gains and closed 1% higher at 2,226 on Tuesday, rising for a third straight session to its highest in over two months. While London equities snapped three days of gains on Tuesday, with benchmark FTSE 100 pulling back to around 7,770 points, dragged by the utilities and technology sectors. 

Russian Shares Extend Rally To 2-Month High
FTSE 100 Snaps Three-Day Rally

Russian Shares Extend Rally To 2-Month High
The ruble-based MOEX Russia index extended early gains and closed 1% higher at 2,226 on Tuesday, rising for a third straight session to its highest in over two months. Financial shares led the gains, with Sberbank and Renaissance advancing more than 2% each to set the pace for lenders and insurance providers. The sector closed the first month of the year nearly 10% higher, supported by Sberbank’s strong year-end corporate results. Also, metallurgists and miners extended their recent rallies and closed in the green, despite the drop in base metal and bullion prices. Meanwhile, oil and gas producers continued to underperform the broad index and traded mixed. Energy producers slid 2% in the month on average, as investors continued to assess the future for Russian energy exports ahead of the G7’s price cap on Russian seaborne export of diesel and other fuels to be triggered next week.

FTSE 100 Snaps Three-Day Rally
Britain’s gloomy economic outlook continued to keep risk appetite subdued, with the IMF cutting its 2023 UK GDP forecast by 0.9 percentage points and now predicting a contraction of 0.6 percent. At the same time, grocery price inflation in the country hit a record 16.7% in the four weeks to 22 January 2023, according to Kantar, the highest level since it started tracking the figure in 2008. On the monetary front, the Bank of England will likely hike interest rates by 50 bps to 4.0% on Thursday to tackle double-digit inflation. Ocado and Rolls-Royce Holdings were among the biggest laggards on the index, down roughly 4.8% and 3.3%, respectively. In January, the export-oriented index jumped more than 4%.

Wall Street Posts
Best January Since 2019

The Dow added more than 360 points on Tuesday, while the S&P 500 and Nasdaq 100 almost gained 1.5% and 1.7%, respectively, as investors digested a batch of economic data and earning results in the busiest week of earnings season. On the economic front, the growth in US labor costs slowed down in December, indicating that the Federal Reserve’s aggressive approach to tame inflation will most likely ease on Wednesday. General Motors jumped almost 8% on its firm earnings report and Pfizer added 1.4% amid its weak 2023 outlook, while Caterpillar missed estimates and dipped 3.5%. Meantime, PayPal went up 2.3% after it planned to cut 2,000 jobs. In January, the Nasdaq 100 rallied 11.5%, while the S&P 500 and Dow were up 6.6% and 2.9%, respectively, marking their third positive month.

Gold Extends Losses To Over 1-Week Low
Oil Hovers Near Three-Week Low
Silver Retreats To 6-Week Low

And there was also price action in the commodity fzture market today around significant price zones.

Gold Extends Losses To Over 1-Week Low
Gold extended losses to nearly $1,900 an ounce on Tuesday, the lowest in over a week, as investors await central banks meetings in US, UK, and Euro Area. In the US, the Federal Reserve will likely slow down the pace of tightening at the end of its two-day policy meeting on Wednesday, delivering a 25 bps hike amid mounting evidence that inflation in the US has begun to ease. The latest data showed that the Fed-preferred core PCE inflation measure in the US slowed to an over one-year low in December. Meanwhile, both the Bank of England and the European Central Bank are set to raise rates by 50bps on Thursday. Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa. Still, the yellow metal is set to gain for the third straight month amid global recession fears and bets for a slower pace of monetary policy tightening.

Oil Hovers Near Three-Week Low
WTI crude futures dropped more than 1% to below $77 per barrel on Tuesday, a level not seen in almost three weeks, as signs of robust Russian exports and fears of a global economic slowdown rattled investors. Russian oil producers have been able to secure export deals despite Western sanctions and price caps, as India and China have continued buying Russian oil sold at a discount. On top of that, investors fretted about the global economy’s health as central banks worldwide moved aggressively to tamp down inflation. Still, the reopening of the Chinese economy has given markets reasons to be bullish, with recent data showing that Chinese manufacturing and services activity rebounded sharply in January. Meanwhile, in the Middle East, Israel carried out a drone strike against a target in Iran over the weekend, fueling fears of supply disruptions. OPEC will also likely maintain current oil production levels when they meet later this week, keeping global supplies tight.Silver Retreats To 6-Week Low
Spot silver prices declined to the $23 per ounce mark in late January, the lowest in six weeks and tracking the drop of other bullion assets as the dollar extended its rebound ahead of the Federal Reserve’s first policy decision of the year. The central bank is expected to raise its funds rate by a slower 25bps, but investors tread cautiously, accounting for the possible dovish pivot pushback. Meanwhile, recession concerns tilted silver prices to go down, as traders worried about low demand for the metal as an industrial input for goods with high electricity conduction needs, which was reflected by its sharp underperformance to gold in January. Still, projections of weak supply limited the fall, as COMEX inventories remained under pressure and LBMA stockpiles plunged amid outflows to India.DEVISE 2 DAY 48h
– Where I Was Wrong, Where I Was Right

We are heading into one of the most important weeks of the quarter, of this year 2023, with a flurry of important economic data including big ecomony data from the united states – even the us jobs data, on friday. The FED meeting on Wednesday will be followed by decisions at the Bank of England and the ECB over the course of the week. At the same time, a wave of earnings news is sweeping Wall Street, with the focus on the tech sector. AMD reports Tuesday night, followed by Meta on Wednesday night and Apple, Amazon and Google on Thursday night. Caterpillar, Eli Lilly, Exxon, Ford, GM, McDonald’s, Pfizer and Starbucks are also reporting results throughout the week. It’s hardly surprising that we’re seeing some profit-taking after the massive rally. The Nasdaq is up 11% year to date with the Russell 2000 up over 8%.

However,
the first experiences in 2023 are far too short to make presumably reliable predictions, and/or the periods of professional forecasts are also too different – like at every start of any year. Nevertheless, I have now dared to do it – at the end of January 2023 and/or at the beginning of February 2023:

DOW Future long
(as a conservative base investment)

DAX Future long
(as a German patriot, without overpriced
technology companies from Silicon Valley)

incl. EURUSD long
(after the FED had already done most of its
homework in 2022 – in contrast to the ECB,
which still has to do it in 2023).

and/or long TESLA shares
– as a highly speculative admixture.

If you go long a maximum of 5% of your portfolio withthese four 4XSetUps, it sgould be wirth (from today’s perspective), more or less, until the end of 2023! Don`t you think so, also?

Of course I don’t know how the future, let alone how the price action will develop in this year 2023 either. Nevertheless, it is not important, as most market guys always assume, to anticipate the future correctly, but rather to position oneself accordingly for certain upcoming scenarios – and/or much more in doing so all imaginable (mathematically and or but also semantically to include justifiable) scenarios. And that’s what I’ve just done with our four long 4XSetUps trading capavilities. Because the inflation, the war, let alone the energy crisis, of 2022 has been a disastrous year for the economy, markets and consumers. Let’s not fool ourselves, please. And in 2023 a recession is may be to come. However, it is unclear whether it will be a hard landing or just a mild downturn. Therefore always operate with stop-lost marks to secure losses. And/Or also target price marks – even if there may be other possible profits.

All experts agree that 2022 was one thing in particular: unprecedented. For the first time in more than half a century, both stocks and bonds brought losses to investors, while consumers in Europe and Germany suffered from double-digit inflation rates in some cases. Will 2023 bring improvement? Or is the great economic collapse coming? What I do not know! But I will, also this year, every trading day, to the best of my knowledge and belief, inform you so competently that you can hardly wait to read my, our, your, next DEVISE 2 DAY Affiliate Financial Market Online Newspaper again tomorrow.

Due to the numerous regular meetings of the central banks, and or at the same time the natural reporting of the quarterly figures on Wall Street, don’t forget to include the commodity price action also in your considerations, my dear, loyal readers.

Because I’ve been playing with the idea of formulating a new 4XSetUps trading capability in the UKOIL for days. Where we had already realized three profitable 4XSetUps and/or three lossy 4XsetIps last year 2022. But I currently lack the courage, and or the conviction! However, anyone who is courageous and/or has a conviction regarding the oil price action should contact me this week via email Devise2Day@gmail.com…