Interesting week for markets

Nadia ElBilassy, Market Analyst at Equiti

A week of market Frenzy.

Equiti Group

Markets have been spiraling this week, largely on the back of a strong earnings season, hot data week and an exceptionally heated stock market. While the overarching sentiment for the year centers around rate cuts, the current scenario leans towards a predominantly risk-on environment, coupled with a trend of decreasing inflation, Lets dive in.

In earnings, Amazon announced fourth-quarter results that surpassed expectations, with robust cloud growth meeting projections and e-commerce thriving thanks to a successful holiday shopping season. Apple Q1 results also topped estimates in its fiscal Q1 report but weakness in China weighed, sending the stock price lower.

Bigger gains in earnings, propelled a continuation of the rally in major indices. And following a mini led correction post the Federal Reserve meeting, the Dow achieved a new record closing high on Thursday night, closing in at 38,519. The Dow surged 369 points after confirming its entry into the bull market last month.

Additionally, European shares climbed to their highest levels in two years, propelled by a positive Wall Street session driven by a series of favourable earnings reports, with more anticipated this week.

Moving on to central banks this week, Powell’s statements rattled markets as he dialed back expectations of an imminent cut in March. The current outlook leans towards the likelihood of a cut in June, yet this adjustment managed to sustain market enthusiasm, contributing to stocks surging to new record highs.

Bank of England also kept interest rates unchanged at 5.25%, marking the first three-way split amongst the MPC members since the 2008 financial crisis, as two advocated for an increase, six opted to maintain the current rate and one recommended a rate cut. The GBP/USD pair slid to 1.2624 before rebounding back to 1.2771 today, putting the consolidative phase to test, particularly in the face of the Bank of England’s hawkish rhetoric.

On the data side, Eurozone inflation slowed annually to 2.8% in January, compared to 2.9% in December according to the flash estimates, which pushed the euro to a seven-week low near $1.077, its lowest level since December 13 before rebounding again today as markets price in central bank cues.

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