- MARKET INSIGHTS
- Feb 3, 2023
DAX 40 surged on Thursday despite hawkish ECB tone.
- MARKET INSIGHTS
- Feb 3, 2023
DAX 40 surged on Thursday despite hawkish ECB tone.
Wall Street’s main indexes started the new year on a negative note amid rising concerns of upcoming recession, fuelled by further evidence of a strong labour market, which spurred worries that the Federal Reserve could keep raising interest rates for longer than expected.
The U.S. labour market remained resilient around the end of last year, despite increasing evidence of layoffs at individual companies. According to ADP’s survey published on Thursday, private businesses in the U.S. created 235K jobs in December 2022, significantly above market forecasts of 150K, and almost twice November’s level of 127K, which is clearly still too high for the Fed’s liking.
The initial weekly jobless claims decreased by 19K to 204K in the week ending 31st of December 2022, down from the previous week’s revised level of 223K and below forecasts of 225K. This is the lowest reading since September 2022, showing the labour market remains tight and could contribute to further inflationary pressures in the U.S.
The labour market is strong but fragmented, with hiring varying sharply by industry. Businesses that were hiring aggressively in the first half of last year have slowed and, in some cases, started cutting jobs in the last months of 2022.
A strong labour market is usually a sign of economic strength; however, with the current economic backdrop it is seen as a reason for the Federal Reserve to keep rates elevated, hence the good news on the labour front is seen as bad news for the stock market.
The S&P 500 lost more than 44 points on Thursday, as investors digested the economic data and the latest Federal Reserve meeting minutes. Evidence that the job market remains tight, with stronger than expected ADP and JOLTs job openings figures, strengthened expectations that the Fed will stick to its aggressive tightening.
According to minutes from the central bank’s December meeting, which were released on Wednesday, the Fed remains committed to combat inflation and foresee higher interest rates until there is clear evidence that inflation was easing, despite prospects of an economic slowdown.
Federal Reserve officials are of the view that a restrictive policy is needed until incoming data shows that inflation is on sustained path to 2%, which they expect could take some time. Following the minutes, Fed Chair Jerome Powell said that while there has been some progress made in the fight against inflation, he expects interest rates to remain elevated even after all the hiking is done.
Source: Tradingview
Overall, the decline from the January 2022 peak is still in progress and we have continuously evolving evidence that the stock market remains in a fragile state and that the bear market is in full swing. The weekly RSI indicator shows that the momentum conditions remain particularly weak, shedding negative cast on the chart and backing up the fundamental outlook that the market is not out of the woods yet.
We are of the view that a subsequent break below minor support of 3,764 is highly likely, which would confirm the continuation of the decline from the December 2022 high targeting 3,650. Over the medium-term, we still see high probability of a new bear market low to be posted in the next three to six months with potential downside target of 3,400.
Active traders looking for magnified exposure to U.S. equity benchmarks could consider our 3x Long US 500 and -3x Short US 500 ETPs to partake in upcoming short-term up and down swings.
Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.
Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.
Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.
Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.
È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.
Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.