Uncertainty Lingering Across Markets on Friday

The general fallout from the hawkish Fed comments we’ve heard this week seems to be an air of uncertainty, reflected most visibly in US markets which struggled again yesterday. The US Dollar is not seeing much life in recent sessions though the Dollar Index looks to be holding onto the rally from last week for now suggesting further near-term pain for US stocks unless USD unravels from here. US UoM consumer sentiment and inflation expectations will be the key data events for today. We also have further Fed commentary to watch from Fed’s Waller and Harker.

Key Factors for Today

- USD treading water, yet to give up last week’s gains
- Mixed action in markets – uncertainty building around Fed and geopolitical tensions
- Paypal falls on spending warning
- JPY rallies on risk aversion gains
- Oil and metals stable following sales yesterday

Coming Up

- GBP – NIESR GDP Estimate
- USD – UoM Consumer Sentiment
- USD – UoM Inflation Expectations

Equities Reflect Return of Uncertainty

Equities markets saw mixed action once again yesterday. Initial gains were tempered across the board with both the DAX and the FTSE pulling back from highs. The FTSE struck another record high before softening later in the session. US stocks remained pressured on the back of hawkish Fed comments earlier in the week. Perhaps some uncertainty too linked to reports around potential escalation of the Russia-Ukraine conflict. Russia is reportedly planning a big new offensive in coming weeks while speculation around a Russian response if the UK provides fighter jets to Ukraine is also getting some market attention.

Paypal Falls on Spending Fears

US earnings season takes a break today with no large-cap companies due to report. Yesterday saw Paypal shares plunging lower by 4% on its Q4 earnings. Paypal reported EPA of $1.24 vs $1.19 expected on revenues of $7.383 billion vs $7.389 billion forecast. The very slight miss on revenues was not the issue, however. Shares fell as traders reacted to the company’s rather bleak warning of the downside risks to the US economy, in particular discretionary spending which it sees as declining sharply this year.

JPY Rallies on Safe Haven Demand

A softer start for risk markets on Friday has seen the Japanese Yen taking the lead as the strongest currency via increased safe-haven inflow. JPY has been out of favour recently given the broader gains we’d seen in risk markets ahead of the recent uptick in USD. However, with risk assets pulling back and USD showing little sign of fresh upside, JPY has taken the majority of demand so far today.

GBP Falls on Weak UK GDP

GBP has been a little weaker today in response to the latest UK economic data received this morning. UK monthly GDP contracted 0.5% last month, down from 0.1% prior and worse than the expected 0.3% contraction the market was looking for.

Metals & Oil Stabilise Following Losses

In the metals and commodities space, both gold and silver are back in the green today following heavy selling yesterday. Still sitting at the foot of last week’s declines, both metals look vulnerable to further losses unless we see a sharp bullish reversal soon. Crude prices look a little more stable today also. Crude futures managed to bounce back off yesterday’s lows and remain in the green ahead of the weekend despite demand concerns resurfacing on the back of the latest EIA report.