Stocks rallied at the end of last week and the beginning of this week following the US jobs report for December showed slowing wage growth. Investors are optimistic that this will ease pressure on the Fed regarding further rate increases and lifts the likelihood that the central bank may even begin cutting rates later in the year.
There’s no indication from the Fed itself that cuts are on the radar though, in fact minutes from its December meeting suggested no letting up in its plans to squeeze the US economy.
Investors will be closely watching the US inflation report this Thursday and earnings from major US banks including JP Morgan and Bank of America which are due on Friday.
Shares in Europe also rallied after data indicated slowing inflation. This is largely due to falling energy prices. We shouldn’t be expecting that the ECB will be thinking about lowering rates just yet though; the rate of inflation is still running well above the central bank’s target of 2%.
Expect earnings to become more of a focus as the US fourth-quarter reporting season begins.
Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.
This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’