American News Group

Weekly Market Review – February 11, 2023

News Staff

Stock Markets

Major stock markets indexes ended slightly lower this week, most possibly due to the release of relatively little economic data to give investors reason to take strong positions in the market. The Dow Jones Industrial Average dipped lower by 0.17% while to total stock market pulled back slightly by 1.43%. The S&P 500 Index also retreated by 1.11%. The tech-heavy Nasdaq Stock Market Composite showed the largest movement, declining by 2.41%, while the NYSE Composite took a nudge down by 0.55%. CBOE Volatility, the indicator of risk perception among investors, advanced by 12.00%.

Most of the sectors within the S&P 500 performed similarly, with energy stocks noticeably outperforming the others while communications services underperforming the rest. There is a recent pattern of short covering, where certain stocks were being bought back by hedge funds and other participants to cover bets that the shares would fall. The stock-specific event that proved most significant in moving the market was the rapid sell-down of the shares of Google’s parent, Alphabet. The counter lost roughly $100 billion in market capitalization on Wednesday as it lost 10% of its value during the week. In its first public demonstration on Monday, Google’s new artificial intelligence (AI)-based chatbot, Bard, make a mistake in identifying the first satellite to take a picture of an exoplanet. The debuts of ChatGPT and Perplexity, Bard’s rival chatbots, have raised concerns among investors regarding the ability of Google to maintain its dominance in AI and internet search. Microsoft invested heavily in ChatGPT creator OpenAI and unveil on Monday a prototype of the two companies’ combined search engine.

U.S. Economy

Statements from Federal Reserve officials have sent stocks in a roller coaster ride on Tuesday and Wednesday this week. Tuesday saw stocks rally after Fed Chair Jerome Powell repeat an earlier reference to the disinflation process having started. Investors were concerned that the unanticipated upward figures in the January payrolls report that was released on Friday may cause Powell to reverse his stance and consider hiking interest rates aggressively again. The following day, however, other Fed officials released a series of apparently hawkish comments that appeared to send stocks back lower.

After the big payrolls report, the few reports released during the week were mostly consistent with expectations. The weekly jobless claims came in at 196,000, which is slightly higher than consensus estimates although it is still close to recent nine-month lows. The University of Michigan’s preliminary assessment of February consumer sentiment, which was released on Friday, moderately exceeded expectations and approached its highest level (664) since January 2022.

Regarding inflation, the consumer price index, the key indicator for inflation in the U.S., has receded for six straight months and has remained mostly in line with forecasts, or, alternatively, surprised to the downside, for the last three months. Market forecasts now expect headline inflation to fall under 4.0% by the end of 2023, and closer to 2.5% by 2024. The current trend has alleviated pressure from the Federal Reserve and global central banks that have been aggressively raising interest rates in an attempt to bring inflation under control.

Metals and Mining

According to updated research from the World Gold Council, the past year was a record year for central bank gold demand. This data indicates the presence of significant bullish factors that are currently supporting the gold market. While a record for central bank gold buying is not expected to break any records, it does indicate that they are likely to continue to be net buyers. There is consistent demand from the People’s Bank of China, which bought 15 tonnes of gold last month according to released data. This is the third straight month that China increased its gold reserves, and the trend is likely to continue in the near term.

In this past week, gold prices closed at $1,865.57 per troy ounce, up by 0.03% from the previous week’s close at $1,864.97. Silver, which closed a week ago at $22.35, ended this week at $22.00 per troy ounce, down by 1.57%. Platinum came from its price last week at $976.78 and closed this week at $949.55 per troy ounce, down by 2.79%. Palladium previously closed at $1,631.77 but closed this week at $1,545.67 per troy ounce, lower by 5.28%. The three-month futures LME prices for base metals were mostly down. Copper ended one week ago at $8,980.50 and this week at $8,857.50 per metric tonne to chart a decline of 1.37%. Zinc, the price of which was $3,241.50 one week ago, ended this week at $3,042.50 per metric tonne, a slide of about 6.14%.  Aluminum dropped 5.02%, from its week-ago price of $2,569.50 to this week’s price of $2,440.50 per metric tonne. Tin fell 3.63% week-on-week, from $28,379.00 to $27,349.00 per metric tonne.

Energy and Oil

The introduction of the oil products price cap has brought the spirit of the stock market to life after months of macro-driven price swings and has at last brought fundamentals back into the spotlight. As a reaction to sanctions, Russia announced that it would curb output, which is arguably the first major supply disruption of 2023. According to Russia’s deputy prime minister Alexander Novak, Russia will cut oil production by 500,000 barrels per day (b/d) in March 2023 in reaction to the recently introduced product price cap and EU import ban, pledging not to sell its exports to members of the price cap coalition. This happened as Colombia failed to trigger any notable market reaction.

Natural Gas

For the week beginning Wednesday, February 1, and ending Wednesday, February 8, 2023, the Henry Hub spot price fell by $0.24 from $2.66 per million British thermal units (MMBtu) at the start of the week to $2.42/MMBtu at the end of the week. Regarding Henry Hub futures prices, the price of the March 2023 NYMEX contract decreased by $0.072, from $2.468/MMBtu at the beginning of the week to $2.396/MMBtu at the end of the week. The price of the 12-month strip averaging March 2023 through February 2024 futures contracts declined by $0.072 to $3.196/MMBtu.

International natural gas futures prices decreased during this report week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $1.13 to a weekly average of $18.30/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.21 to a weekly average of $17.83/MMBtu. In the corresponding week last year (the week from February 2 to February 9, 2022), the price in East Asia was $24.96/MMBtu, and the price at TTF was $26.44/MMBtu.

World Markets

European shares grew weaker on worries that overly aggressive central bank policy might prolong an economic downturn. In local currency. The pan-European STOXX Europe 600 Index closed the week 0.62% lower. The major stock indexes in the region ended mixed. Germany’s DAX Index lost by 1.09%, Italy’s FTSE MIB Index rose by 1.18%, and France’s CAC 40 Index slid by 1.44%. The UK’s FTSE 100 Index dipped by 0.24%. Several European Central Bank (ECB) policymakers announced their commitment to a hawkish stance in light of the most recent rate-setting meeting where they reiterated that the ECB must not be complacent in reining in runaway inflation. Executive Board Member Isabel Schnabel’s comments caught the attention of the market at the start of last week. She said that the recent weakening of inflation was not due to ECB policy, and stressed that the underlying inflation was still exceptionally high. Other central bank officials from Germany, Latvia, and the Netherlands all suggested that rates needed to ascend further after the next anticipated half-point increase in March.

Japan’s equities markets gained some strength over the week. The Nikkei 225 Index gained 0.59% and the broader TOPIX Index was up 0.85%. There was robust speculation about the potential nominees to be the next governor and deputy governor of the Bank of Japan (BoJ). The Nikkei news agency reported after the markets closed on Friday that the government is planning to appoint economist Kazuo Ueda, who is also a former member of the BoJ Board, as the next governor of the central bank. Ueda had not been mentioned as a shortlisted candidate. Throughout the week, the expected nominee of the government for the position was Deputy Governor Masayoshi Amamiya, thus the news concerning Ueda came as a surprise to many. For the week, the yen strengthened to approximately JPY 130.5 against the U.S. dollar, from around JPY 131.2 per greenback the week before. The yen surged on Friday due to reports of Ueda’s potential appointment, as well as investor expectations that the central bank may adjust its monetary policy. The yield on the 10-year Japanese government bond (JGB) was mostly unchanged during the week, remaining at the 0.50% level at which the BoJ strives to cap JGB yields.

China’s stock markets retracted due to the spy balloon controversy. The issue sparked tensions between China and the U.S. and somewhat slowed the expected faster economic growth that China was expecting after it exited from the Covid-19 restrictions. The Shanghai Stock Exchange Index and the CSI 300 Index both registered modest declines for the second consecutive week as investors were reminded about the geopolitical risks of investing in China. The spy balloon incident reignited the likelihood of sanctions on China from the U.S.,  Last October, the Biden administration announced a sweeping ban on U.S. companies selling advanced semiconductors and certain chip manufacturing equipment to China, and the spy balloon event resurfaced the fragility of the Chinese economic recovery. Possible measures that the U.S. could take in the next two years include outbound investment screening for investments in China and other export controls.

The Week Ahead

In the coming week, important economic data that are scheduled to be released include CPI inflation data, retail sales growth, and leading economic indicators.

Key Topics to Watch

Markets Index Wrap Up

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