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Andreas Zanin
Analysis, Market Analysis | January 31, 2024

JASPER’S MARKET SQUAWK 31-01-2024

Microsoft Dips After Earnings, Markets Focus on Fed

Market Movers

  • Microsoft’s AI strengths underwhelm investors, leading to a dip in shares.
  • IMF uplifts 2024 global growth outlook, signalling a potential ‘soft landing’.
  • Norway’s wealth fund records a staggering $213 billion profit, buoyed by tech stocks.
  • Japanese yen and government bond yields spike briefly following BOJ’s hawkish stance.
  • European Central Bank faces pressure to ease rates amidst economic contractions in Germany and France.

Econ Calendar

  • Federal Reserve policy decision.
  • Germany inflation figures, import prices, retail sales data.
  • United Kingdom nationwide house prices.
  • France producer prices.
  • Eurozone inflation data release.

What’s Happening

Microsoft’s latest announcements regarding its advancements in AI were not enough to impress investors, as shares took a downturn. Despite those initial losses, Microsoft’s stock has seen an approximately 9% increase in 2024 to date, outpacing the S&P 500 index which has risen by 3% during the same period.

The US dollar has been on solid ground, anticipating the Federal Reserve’s rate decision. Investors and traders are keenly observing the Fed’s statements for clues on future rate cuts, which could significantly sway the dollar’s trajectory.
EUR/USD continues to drift down towards 1.08 as the timing on possible ECB rate cuts converge with the US Federal Reserve. With Germany’s economy shrinking and France’s stalling, the European Central Bank is under increasing pressure to lower interest rates to prevent a deeper economic downturn.

The Bank of Japan’s hint at a possible policy shift towards raising interest rates, the first since 2007, has sparked some movement in the Japanese yen. The Bank of Japan’s unexpected hawkish shift has sent ripples through the currency and bond markets, with a notable brief surge in the yen and Japanese government bond yields. This development is significant as it marks a potential end to Japan’s long-standing ultra-loose monetary policy, signalling broader changes in global central bank policies.

Norway’s Sovereign wealth fund, driven primarily by its investments in technology stocks, posted a record profit of $213 billion. This remarkable achievement underscores the ongoing outperformance of the largest technology companies, even in a fluctuating economic environment.

Chart of the Day

Another interesting statistic consistent with the current performance of SP500. At the moment the index, in the month of January, is advancing by approximately 2.05% (at current prices). History tells us that if the month ends with a gain of more than 2%, then the index could finish the year with a median return of around 13.5%. Additionally, the times January performance was above 2%, the index finished the year in the green 84% of the time.

Source: The Market Ear

Source: Matteo Marchetti, KTM Market Analyst

For all the latest market developments follow Matteo @MMTradingKTM and Key to Markets @keytomarkets on Telegram

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