The end is near, and we are closer day by day for the closure of the red 2022. However, we still have roughly 2 weeks for the end of the year, and Santa is in town.
Throughout the years it was known that the last financial week before Christmas brings new surprises, whether it is because of the enormous wall street bonuses, or it’s hopes of rally opening in the new year.
Will the Santa rally be applicable this year as well?
Let’s go back to last week to try and anticipate the current market conditions. It was a great financial week filled with monetary decisions, whether from the Federal Reserve, ECB, BOE, or even the SNB.
All the above-mentioned central banks raised rates by 50bps strictly, however, it was certainly not translated for each country in the same manner.
Most if not all central banks announced the uncertain rates that will follow next year, as they are fixing the decision directly to the upcoming inflation figure releases, which will lead on these decisions.
The instrument that took a breather last week was the greenback, which benefited from the 50bps increase, and from the pessimistic tone set by Powell in the press conference.
On the other hand, the EUR/USD pair retraced testing a strong demand zone between 1.05824 and 1.06, which also acts as a psychological support.
The overall direction for this pair seems to be to the upside form a technical view, especially after having Lagarde announcing the full-on attack on inflation.
USD/JPY pair is under further pressure testing the 136 level which happens to be on the 200 SMA on the daily Timeframe. Tomorrow will be a big day for the pair as the BOJ is set to announce the possible change in interest rate.
It is expected to maintain the rate of -0.1% as their main focus currently is on attracting investments rather than fighting inflation.
Last but not least comes the USD/CHF, which retraced last week testing a strong downward trend in correlation with the dollar index.
The increase of 50bps by the SNB is not a news to miss as it is unusual to have high rates in Switzerland, hence, this might put further negative pressure on the pair, which might lead to a breakout below 0.92432.
Fears of rising interest rates drove the stock market Indices lower for the second week in a row to levels last seen in early November sp500 dropped 2%, Dow jones dropped 1.85% and Nasdaq dropped 3%. During the last week, two announcements sent market sentiments in opposite directions.
On Tuesday, the US CPI was released. According to the data, headline inflation increased by 0.1% in November compared to October, which was 0.1% less than expected. The overall CPI increased 0.1% from the prior month and was up 7.1% from a year earlier, as lower energy prices helped offset rising food costs.
On Wednesday the release of the FOMC's December policy meeting statement sent stocks plummeting. Federal Reserve Chair Jerome Powell said the central bank still has a “ways to go” in taming inflation after opting for a 50-basis-point hike following four consecutive 75-point moves this year. FOMC has become sharply more hawkish than three months ago none of the members thought rates would finish next year above 5% no only two don’t think this.
Some acquisitions and mergers happened last week.
- JP Morgan (JPM) bought 48.5% of Athens-based payments fintech Viva Wallet for more than $800 million.
- Private equity firm Advent International (AVDWF) on Friday agreed to buy satellite operator Maxar Technologies Inc (MXR) for about $4 billion.
Earnings during last week.
- Oracle Corporation (ORCL) topped the market’s expectation by 3.42% recording earnings per share of $1.21 versus the expected EPS of $1.17, and revenues of $12.28B equivalent to a y-o-y growth of 18.5% versus expected revenues of $12.02B as demand for cloud services grew during Q2’22. The company declared a quarterly cash dividend of $0.32 per share, payable to shareholders on January 10, 2023. The company outperformed the S&P 500 by 2.67 over the past month and -1 over the past year. Oracle expects revenue to grow by around 21%, while the market forecasts growth of about 17.4%.
- Adobe Inc. (ADBE) revenues during Q4’22 were the same as the market’s expectations of $4.53 of revenues representing 14% y-o-y growth and EPS of $3.6 versus $3.5 per share, and full-year revenues of $17.61B representing 12% y-o-y growth with full-year diluted EPS of $10.10. During Q4’22, Adobe announced that it will acquire Figma, a software firm to be the largest transaction to date for the company for around $20B.
Some of the Upcoming Earnings during the upcoming week (19-26th December)
|
Stock |
Current EPS |
Expected EPS |
Current Revenues |
Expected Revenues |
|
Nike Inc. (NKE) |
$0.93 |
$0.652 |
$12.69 |
$12.57B |
|
General Mills (GIS) |
$1.11 |
$1.06 |
$4.72B |
$5.19B |
|
FedEx Corp. (FDX) |
$4.83 |
$2.83 |
$23.24B |
$23.72B |
|
Micron Technology Inc. (MU) |
$1.45 |
$-0.017 |
$6.64B |
$4.15B |
Oil weekly market outlook
WTI rebounded approximately 4% last week from a low price of $70.27 closing at $74.47. The rebound took place in reaction to a December 5th dim week where WTI retreated 10.9%, below 75$. The current downward move in WTI was stimulated by related news of oil market outlook by both the EIA and OPEC+ forecasting lower demand due to slowing economic global growth. Brent oil rebounded 3.10% on the week of December 12th from its $79.29 low price. The rebound came after an 11.12% loss that was claimed by the Saudi lead market on the week of December 5th in correspondence to the OPEC+ decision to maintain oil supply at current levels of approximately 28.83mb/d.
China’s economy reopening and the EU oil sanctions on Russia would impose a positive mood to the oil market next week specially that both WTI and Brent are upwardly retracing from 38% and 50% respectively however both are expected to trade within the 1st week of December ranges between $70.10-$82.7 for WTI and $75.16- $88.39 for Brent oil.
Gold declined last week by 0.25%, while silver declined by 1.0% as a result of the US Federal Reserve raising interest rates by 50 basis points, and after statements from the Federal Reserve Jerome Powell that interest rates will remain high for a longer period until inflation returns to 2% levels.
Technically, the attached chart (Figure 1) shows that gold is currently trading between a support area near $1774 an ounce and a resistance area near $1814 an ounce. We will watch if the prices are able to target $1814 an ounce.
As for silver (Figure 2), levels close to $23.4 an ounce are very important, and we will monitor its ability to surpass it, and if it succeeds in breaking it, this makes us expect a positive movement for prices.
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(Figure 1)
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(Figure 2)
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