The AUD is the strongest and the EUR is the weakest as the North American session begins

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The strongest to the weakest of the major currencies

The AUD is the strongest of the major currencies while the EUR is the weakest of the major currencies. The USD is mixed with little changes vs the GBP, JPY, CHF, CAD. The USD is lower vs the AUD (-0.24%) and NZD (-0.16%), and higher by 0.17% vs the EUR. The JPY is mixed after the BOJ rate decision.

Overnight, the Bank of Japan (BoJ) announced that it will keep its policy settings unchanged (as expected). The key interest rate remains at -0.10%, and the central bank will continue with its Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC), aiming to keep the 10-year Japanese Government Bond (JGB) yields around 0%. The BoJ also maintains a 1% upper bound reference rate for market operations. The decision to uphold the YCC policy was unanimous.

In terms of forward guidance, the BoJ has made no changes, signaling a commitment to persist with its current monetary easing policies. The bank has expressed readiness to take additional easing steps if necessary and emphasizes a patient approach to monetary easing, staying responsive to economic developments.

The BoJ notes that inflation expectations are gradually increasing. It anticipates that inflation will likely continue to accelerate towards the BoJ’s target by the end of the projected period in its quarterly report. Meanwhile, consumption is reported to be rising moderately.

In its Outlook Report, the BoJ has adjusted its forecasts:

  • For Fiscal 2023, the real GDP growth forecast was lowered to 1.8% from the previous 2.0%.
  • For Fiscal 2024, the GDP growth forecast was raised to 1.2% from 1.0%.
  • The Fiscal 2025 GDP growth forecast is unchanged at 1.0%.

Regarding core consumer price index (CPI) projections:

  • The Fiscal 2023 forecast is changed at 2.0%.
  • The Fiscal 2024 forecast is lower to 2.4% from 2.8%.
  • The Fiscal 2025 forecast is higher to 1.8% from 1.7%.

After the Bank of Japan decision to maintain its interest rates, Governor Ueda expressed increasing confidence in achieving the 2% inflation target, noting a steady rise in the likelihood of this outcome. He highlighted the moderate increase in services prices and the development of a virtuous cycle of wages and prices. Ueda observed that the impact of import prices, a major inflationary factor, has peaked and is now declining. He differentiated between the initial phase of cost-push inflation and the emerging positive wage-price cycle. Ueda also pointed out that achieving the inflation target doesn’t necessarily require a positive output gap. While acknowledging some temporary factors in services price inflation, he emphasized the overall gradual rise in these prices. Finally, he suggested that Japan is moving away from deflation, characterized previously by a negative inflation rate.

On the ongoing wage negotiations, BOJs Ueda highlighted labor unions are pushing for higher pay and receiving positive responses from large companies. This year, more companies have agreed to wage increases compared to last year, indicating a shift towards higher employee compensation. Although uncertainty about the extent of these wage hikes persists, it is less than in the previous year. Ueda suggested that policy changes could be considered even if real wages are declining, provided the economic outlook is positive. He emphasized that not all small and medium-sized firms need to significantly raise wages for policy adjustments. The BoJ is assessing wage trends using a broader range of economic data, extending beyond large firms to understand the overall economic situation.

Overall, the BoJ’s statement reflects a steady approach to monetary policy, with an emphasis on flexibility and responsiveness to economic changes, while gradually steering towards its inflation target.

Politically, the New Hampshire primary takes place and many feel the GOP decision could mark the end of Nikki Haley’s attempt to beat Donald Trump.

The Richmond Fed manufacturing index will be released at 10 AM ET. Last month the index fell -11. Recall last week the Empire manufacturing index plunged to -43.7. The Philly Fed regional index was also weaker than expectations.

The Fed is in the so-called “black out period” ahead of the interest rate decision on January 31.

The earnings season is starting to kick into full gear. Looking at the earnings released this morning, below is a sampling of the major releases and if they beat, missed or met and a snapshot of the market reaction in pre-market trading:

Verizon Communications Inc (VZ) 04 2023 (USD)

  • Adjusted EPS: $1.08 (Equal to expectation of $1.08)
  • Revenue: $35.1 billion (Beat expectation of $34.58 billion)
  • Shares are up 4.57% in premarket trading.

RTX Corporation (RTX) 04 2023 (USD)

  • EPS: $1.29 (Beat expectation of $1.25)
  • Revenue: $19.927 billion (Beat expectation of $19.73 billion)
  • FY24 Guidance:
    • EPS: $5.25 – $5.40 (Below expectation of $5.40)
    • Revenue: $78 – $79 billion (Below expectation of $79.3 billion)
    • Shares are up 3.86% in premarket trading

Procter & Gamble Co (PG) 02 2024 (USD)

  • Core EPS: $1.84 (Beat expectation of $1.70)
  • Revenue: $21.4 billion (Slightly below expectation of $21.49 billion)
  • Shares are up 1.03% in premarket trading.

Halliburton Co (HAL) 04 2023 (USD)

  • Adjusted EPS: $0.86 (Beat expectation of $0.80)
  • Revenue: $5.74 billion (Below expectation of $5.78 billion)
  • Shares are up 2.0% in premarket trading

DR Horton Inc (DHI) 04 2023 (USD)

  • EPS: $2.82 (Below expectation of $2.88)
  • Revenue: $7.7 billion (Beat expectation of $7.6 billion)
  • FY Revenue View: $36 – $37.3 billion (In line with expectation of $36.66 billion)
  • Shares are down by about -5.2% in premarket trading.

3M Co (MMM) 04 2023 (USD)

  • EPS: $2.42 (Beat expectation of $2.31)
  • Revenue: $8.0 billion (Beat expectation of $7.7 billion)
  • Shares aredown -.4.18% in premarket trading on lower-than-expected guidance.

General Electric Co (GE) 04 2023 (USD)

  • EPS: $1.03 (Beat expectation of $0.90)
  • Revenue: $19.4 billion (Beat expectation of $17.42 billion)
  • Shares are down -5.51% in premarket trading. EPS guidance was less than expectations. HMMM.

Johnson & Johnson (JNJ) 04 2023 (USD)

  • Adjusted EPS: $2.29 (Beat expectation of $2.28)
  • Revenue: $21.4 billion (Beat expectation of $20.99 billion)
  • Shares are down -0.22% in premarket trading

Later after the close, Netflix, Intuitive Surgery and Texas Instruments are the highlighted companies releasing.

For the rest of the trading week, the earnings from Tesla, ServiceNow, IBM, Intel, and American Express are all on tap to report:

Wednesday, January 24

  • AT&T
  • Tesla
  • IBM
  • servicenow
  • Lam Research

Thursday, January 25

  • American Airlines
  • Southwest Airlines
  • Dow
  • Intel
  • Visa
  • T-Mobile

Friday, January 26

  • American Express
  • Colgate-Palmolive

A snapshot of the markets as the North American session begins currently shows:

  • Crude oil is trading down -$0.64 or -0.86% at $74.12. At this time yesterday, the price was at $73.43
  • Gold is trading up $3.61 or 0.19% at $2024.88. At this time yesterday, it was trading at $2029.19
  • Silver is trading up $0.20 or 0.90% at $22.27. At this time yesterday, it was trading at $22.23
  • Bitcoin traded at $38,748. At this time yesterday, the price was trading higher at $40,846. The high price after the Bitcoin ETFs were approved for trading reached $49106. Since then, the price is down -20.5%

In the premarket for US stocks, the major indices are trading mixed. Yesterday, all the indice closed higher with both the Dow Industrial Average and S&P index closing at record all-time highs.

  • Dow Industrial Average futures are implying a loss of -20.81 points. Yesterday, the index rose 138.01 points or 0.36%.
  • S&P futures are implying a gain of 4.07 points. Yesterday, the index rose 10.62 points or 0.22%.
  • Nasdaq futures are implying a gain of 32.37 points. Yesterday, the index rose 49.32 points or 0.32%..

In the European equity markets, the major indices are trading lower:

  • German DAX, -0.01%
  • France CAC -0.31%
  • UK FTSE 100 -0.02%
  • Spain’s Ibex -0.75%
  • Italy’s FTSE MIB -0.10% (delayed by 10 minutes).

Shares in the Asian Pacific markets were mostly higher which runs counter to recent trends especially in Hong Kong/China. Hong Kong’s Hang Seng index since January 2023 has fallen -32.39%. The Shanghai composite index since the May 2023 high has fallen -18.95%.

This might help those markets. Be aware:

In trading today:

  • Japan’s Nikkei 225, -0.08%
  • China’s Shanghai composite index , +0.53%
  • Hong Kong’s Hang Seng index, +2.63%
  • Australia S&P/ASX, +0.51%

Looking at the US debt market, yields are trading higher:

  • 2-year yield 4.408% +3.2 basis points. Yesterday at this time, the yield was at 4.397%
  • 5-year yield 4.052% +3.8 basis points. Yesterday at this time, the yield was at 4.031%
  • 10-year yield 4.130% +3.6 basis points. Yesterday at this time, the yield was at 4.097%
  • 30-year yield 4.353% +3.7 basis points. Yesterday at this time, the yield was at 4.306%
  • The 2-10 year spread is at -27.6 basis points. At this time Friday, the spread was at -29.1 basis points
  • The 2-30 year spread is at -5.4 basis points. At this time Friday, the spread was at -8.5 basis points. At session highs last week, the spread got to +7.5 basis points

In the European debt market, the benchmark 10-year yields are mixed:

European benchmark 10 year yields

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