Wake Up Wall Street (SPY) (QQQ): ECB stuck in catch-22 after huge inflation spike
Here is what you need to know on Wednesday, February 2:
And so it begins. The ECB now finds itself just as far behind the curve as the Fed was and still is. Eurozone inflation just printed a massive upside at 5.1% versus 4.4% expected. Italian inflation is running at a 25-year high ahead of the ECB meeting tomorrow. Bond markets have already priced in 35bps of rate increases from the ECB this year despite ECB President Lagarde saying she sees no hikes in 2022.
We now have a slew of global central banks rushing to tighten policy to catch up with runaway inflation. This has historically seen riskier assets struggle, especially in the tech sector. But we should note real interest rates (inflation minus interest rates) are the better metric to watch in this respect, and those are still in negative territory and at multi-decade lows.
Google knocked earnings out of the park after the close on Tuesday, and the shares are up 10% in the premarket. Facebook steps up after the close, and that could and should underpin equities for now. Facebook though is a risk as it has now priced in a beat. The ADP employment just out is a worry ahead of Friday's employment report. The dreaded specter of stagflation comes ever closer.
The dollar has naturally weakened after the Eurozone inflation print and is now trading at 1.1322 versus the euro. Oil is higher again at $89.42, and gold is also higher at $1,804. Bitcoin is flat at $38,700.
European markets are higher: Eurostoxx +0.15, FTSE +0.1% and Dax +0.35.
US futures are also higher: S&P 500 +1%, Dow +0.2% and NASDAQ +1.75.
Wall Street (SPY) (QQQ) news
ADP jobs -301K versus +184K estimate.
Eurozone inflation at 5.1% versus 4.4% expected.
OPEC says to increase oil production by 400K barrels per day.
Alphabet (GOOGL) beats on top and bottom lines, shares surge 10%.
Meta Platforms (FB) reports after the close today.
Paypal (PYPL) drops 15% on an earnings miss.
AMD shares boom as earnings beat estimates.
Xilinx (XLNX) up 12% on AMD earnings. AMD is buying them.
General Motors (GM) up 2% on earnings beat after the close on Tuesday.
Starbucks (SBUX) sees higher inflation as earnings miss due to rising costs.
Boston Scientific (BSX) drops on weak outlook. Earnings were a beat on EPS and revenue.
DR Horton (DHI) up 3% premarket on strong earnings.
Match (MTCH) beat on EPS but forecast missed.
Exelon (EXC) is down 26% on Constellation Energy separation.
Upgrades and Downgrades
Source: Benzinga Pro
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
