MIND THE GAP (0656 GMT)
An impressive 6% rally in global stocks this month, the first gain in January after three years, has got
investors all excited after a dismal 2022.
Fundamentally, prospects for the world economy are not as
bad as feared just a few months ago, prompting the International
Monetary Fund to raise its 2023 global growth outlook slightly.
The IMF cited "surprisingly resilient" demand in the United
States and Europe, easing of energy costs and the reopening of
China's economy.
Still, it would be wise for investors to be mindful of a gap
between expectations and reality.
On Monday, hotter-than-expected inflation data from Spain
and an unexpected decline in the German economy in the fourth
quarter created uneasiness for stock bulls, dragging down
European shares.
Asian equities fell 1% on Tuesday and the dollar was eyeing
a fourth monthly loss as investors reckon a peak in U.S.
interest rates could swing into view as soon as this week's
Federal Reserve meeting.
Flash GDP numbers are due from the euro zone, along with
growth data for France and Italy. The numbers are likely to be
keenly watched for signs on how weary economies are faring.
The ECB is all but certain to raise rates by half a
percentage point on Thursday but fresh inflation data is still
crucial for the central bank's policy guidance for subsequent
meetings.
The Bank of England is set to raise rates by 50 bps to 4.0%,
respectively. Headline inflation moderated in December to 10.5%,
but it's still over five times its official target.
Money market bets show that the U.S. Federal Reserve is set
to raise its policy rate by 25 basis points to 4.50%-4.75% on
Wednesday.
Adding to pressure on British finance minister Jeremy Hunt
to come up with a growth plan, the country became the only Group
of Seven nation to suffer a cut to its 2023 economic growth
outlook in IMF forecasts published on Tuesday.
Britain's flagging economy now appears set to shrink by 0.6%
this year, a sharp downgrade from previously expected growth of
0.3% in the IMF's last forecast in October.
Meanwhile, a U.S. federal appeals court ruled on Monday that
drug manufacturers can limit healthcare providers' use of
outside pharmacies for dispensing drugs under a federal drug
discount programme, marking a victory for Sanofi , Novo
Nordisk and AstraZeneca .
Finally, there's good news for tech staff. With thousands of
layoffs taking place in Silicon Valley, some German companies,
faced with a tight labour market and a shortage of workers with
key software engineering skills, are seizing on the West Coast's
woes as an opportunity to recruit top talent.
Key developments that could influence markets on Tuesday:
Economic data: Euro zone Q4 flash GDP; France Q4 GDP, Jan
CPI flash; Germany Dec import prices, retail sales, flash CPI;
Italy preliminary Q4 GDP
Speakers: Swedish central bank governor Erik Thedeen
participates in an open hearing on financial stability in the
Swedish economy in Stockholm
European results: UBS, Swedbank
U.S. economic data: Q4 employment wages, Q4 Nov house prices
U.S. Federal Reserve begins two-day meeting
U.S. results: Exxon Mobil, Caterpillar, General Motors,
Pfizer, McDonald's, UPS
(Anshuman Daga)
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