Daily Market Outlook, January 27, 2023

Tesla Leads The Charge, Asian Markets Follow Wall Street’s Lead Higher
Asian markets are set to end the week in the green taking their lead from robust trade on Wall Street, led by tech darling Tesla that ended the day higher by nearly 11% taking the Nasdaq higher by 2%
European investors are heading into the weekend with a one eye on next week's data slate with Q4 GDP estimates for major economies including Germany, France & Italy, markets will take some encouragement from the Spanish GDP released this morning printing 0.2% above the 0.1% expected, the belief is that the Eurozone on a whole may sidestep contraction for Q4 ‘22. No tier one data on the docket for the UK today. Chancellor Jeremy Hunt is set to speak at Bloomberg’s European HQ on achieving growth in key sectors including digital technology, green industries and life sciences, as well as setting out a long-term plan to improve productivity. Investors will be more interested in next week’s monetary policy update from the Bank of England, with the European Central Bank and the Federal Reserve also on deck next week, foreign exchange investors will be looking for confirmation of the nascent policy divergence between a more hawkish ECB and a Fed close to a pause if not a plateau in their rate cycle.
In the US, the Federal Reserve's preferred inflation indicator is due for release, the December PCE deflator is expected to confirm the message from the CPI data that both headline and core inflation continued to retreat last month. Market watchers are looking for the PCE deflator to fall to 5.0% from 5.5% and the core PCE deflator to pullback to 4.4% from 4.7%. Personal spending is also expected to have fallen. The data is set to underpin the market narrative that inflation has peaked stateside and is now on the path of decline suggesting economic growth is also slowing, this should mean that US rate cycle is also in the mature phase if not close to termination. The final release of the University of Michigan’s US consumer sentiment survey for January is likely unchanged from the flash reading of 64.6, up from 59.7 in December. The preliminary reading also implied inflation expectations falling to 4.0%, the lowest since April 2021 on an annualised basis.
Markets-wise, European bourses have opened flat on the session, tech stalwart Intel failed to excite investors post market announcing an earnings miss and offering one of its most dire outlooks for the year ahead. Somewhat counter intuitively, European luxury names have posted robust earnings and positive forward guidance with LVMH announcing record profits and raising their dividend. US equity futures are in negative territory as the Dollar remains pressured below the 102 level, supporting EUR and GBP. Crude remains supported above the $80 handle with Gold continuing to trade above the pivotal 1900 level..