Weekly Trading Update 04.02.2022

It’s been a wild week for trading- the reaction to big tech earnings including Facebook and Amazon have been off the charts, while the euro and Sterling exploded higher after central bank meetings. 

There are more Q4 earnings to come this week, including the likes of BP and Ocado from the UK, while US CPI data could determine whether the dollar is really down and out.

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The pivot continues

The biggest theme of last week is the ongoing pivot to tighter monetary policy but the 26% plunge in Facebook stock and 14% jump in Amazon following Q4 results were something to behold.

Europe's central bank policy decision was upset by record Euro Area inflation, which possibly forced a policy pivot. The ECB has now opened the door to a 2022 rate hike after Lagarde acknowledged price increases during the last meeting.

In the UK, the BoE hiked rates for the second time in two meetings, the fastest pace in nearly two decades, warning that inflation could continue to rise well above target for an extended period. Meanwhile, the UK's ONS said that the economy grew back to pre-pandemic levels in November.

Non-farm payrolls beat expectations massively despite concerns over the impact of Omicron, with an upward revision supporting the Fed's hawkish turn. 

Meanwhile, China, the world's second-largest economy was away on a week-long Lunar New Year holiday, keeping Asian markets in check.

What's coming up for markets?

Geopolitical concerns are being blamed for continued interest in gold and oil, with the former trading 1.30% higher and crude marking multi-year highs. 

Massive post-earnings volatility in the stock market continues to be a possibility as earnings season rolls on.

Russian tensions

Both the US and Russia continue to allege the other hasn't fully responded to their demands, while Russia has kicked off the largest military exercise in Belarus since the end of the Cold War. More conversations are expected during the coming week, though there isn't much optimism for a resolution in that time frame. 

Nat Gas

Natural gas prices continued to fall through the end of the week as markets seem to have already priced in sanctions. A break of the 20-week support at $4 could lead to further declines. Of note, Russian President Vladimir Putin scored a natural gas deal with China last Friday amid increasing tensions with the west.

UK earnings

Next week sees earnings season continue with a cornucopia of trader favourites and major corporations reporting. In the UK, we have BP, Ocado, Philip Morris, BAT and AstraZeneca.

US earnings

Across the Atlantic, results from firms like Pfizer, Uber, Lyft, Disney, Coca-Cola, and Pepsico are on the docket. Investors are preparing to pay closer attention to Loews' earnings for insight on the construction sector and CME's details on transaction volumes to gauge how financial markets performed.

Economic data (US CPI)

In terms of data, trade balance figures from the US, Canada, and Europe are expected; the final composite Caixin PMI from China, after the return from holidays; and US CPI figures, to compare with the employment data we got last week.