World Markets In Holding Pattern, IMF Lifted Global Growth Outlook

Barry Adams
31 Jan, 2023
New York City

U.S. stocks lacked direction as financial markets await rate decisions tomorrow and review a fresh batch of earnings. 

The U.S. Federal Reserve is set to announce its rate decision at the end of a two-day meeting tomorrow. 

Markets are factoring in a 25 basis points increase to the benchmark rate range and investors are looking to get a better understanding of the inner workings of the economy. 

Investors reacted positively after McDonald's and GM reported better-than-expected results but Caterpillar and UPS traded lower. 

 

U.S. Compensation Costs Growth Slowed 

The U.S. compensation costs for civilian workers increased 1% in the final three months of 2022 from the previous quarter, the third slowdown in a row, the Bureau of Labor Statistics said Tuesday.  

Wages and salaries, which is about 70% of employment costs in the period rose 1% after rising at 1.3% in the previous quarter. 

Benefits cost increased 0.8% in the final quarter after rising 1.0% in the previous quarter,  

On an annual basis, total compensation costs increased 5.1% in the fourth quarter, slower than 5.0% in the third quarter and declined 1.3% after adjusting for inflation. 

 

 IMF Lifts Global Growth Estimate 

The IMF revised global growth slightly on the resilient consumer demand in the U.S. and Europe despite the elevated energy prices and four-decade high inflation. 

The U.S. economy is expected to grow at 1.3%, China at 5.0% and India at 6.0%. 

Of the 22 largest economies in the world, only the UK's economy is expected to shrink by 0.6% in 2023, according to the data released by the IMF. 

 

U.S. Indexes Trend Lower 

The S&P 500 index increased 0.3% to 4,043.0 and the Nasdaq Composite index advanced 0.3% to 12,002,03. 

Crude oil prices hovered near a three-week low on the worries that despite the U.S. and European Union sanctions Russia energy supplies are growing. 

Moreover, the global demand recovery is expected to be slower than previously anticipated as business activities in China struggle to recover after the ending of zero-covid restrictions. 

Crude oil declined to 46 cents to $77.45 a barrel and natural gas declined 3 cents to $2.64 a thermal unit. 

The yield on 2-year Treasury notes declined to 4.21%, 10-year Treasury notes fell to 3.51% and 30-year Treasury bonds eased to 3.64%.  

 

U.S. Stock Movers 

Caterpillar Inc declined 3.3% to $253.01 after the company reported a rise in sales and earnings but missed analysts' expectations. 

Caterpillar said fourth quarter revenue increased 20% to $16.6 billion from $13.8 billion on higher sales volume and price increase. 

Net income in the quarter declined to $1.45 billion from $2.12 billion and diluted earnings per share fell to $2.79 from $3.91 a year ago. 

Construction machinery sales increased 34% in North America and soared 39% in Latin America. 

General Motors jumped 1.7% to $38.06 after the vehicle maker reported better-than-expected quarterly earnings. 

Fourth quarter revenue increased 28.4% to $43.1 billion after the company sold more vehicles in the U.S.

Net income in the quarter increased 14.8% to $1.99 billion from $1.74 billion and diluted earnings per share rose to $1.39 from $1.16 a year ago. 

 

European Markets Cautious Ahead of Rate Decisions 

European markets traded lower ahead of key rate decisions from the European Central Bank and the Bank of England. 

The Euro Area economy unexpectedly expanded at 0.1% on the quarter in the fourth quarter and following 0.3% in the third quarter, Eurostat, the statistical office of the European Union reported Tuesday. 

In 2022, after adjusting for seasonality factors and calendar days, the Euro Area economy expanded at 3.5% and the European Union economy rose 3.6%, according to the preliminary report released by Eurostat. 

The DAX index fell 0.4% to 15,069.20, the CAC-40 index declined 0.3% to 7,061.98 and the FTSE 100 index dropped 0.5% to 7,748.14. 

The yield on 10-year German Bunds hovered near 2.27%, French bonds traded near 2.74%, the UK Gilts traded at 3.30% and Italian bonds bounced around 425%. 

 

Asian Markets Closed Down

Asian markets traded lower following weak overnight trading in New York. Caution prevailed ahead of rate decisions from the US Federal Reserve and central banks in Europe and UK. 

The Nikkei index declined 0.4% to 27,327.11 and the yen weakened to 130.02 against the U.S. dollar. 

The Shanghai composite index fell 0.4% to 3,255.67 and the Hang Seng index declined 1.03% to 21,842.33. 

Stocks lacked direction in Mumbai trading ahead of the release of the Union Budget tomorrow. 

India's real GDP is estimated to grow between 6% and 6.8% in the next fiscal year ending in March 2024, the survey released in the Parliament by the central government Tuesday.  

The Sensex index in Mumbai advanced 49.49 points to 59,549.90 and the Nifty index increased 13.2 points to 17,662.15. 

The rupee edged lower to 81.41 against the U.S. dollar.