Daily Market Outlook, January 17, 2023

China Growth Concerns Cap Asian Equities EX Japan, BoJ Bets Supports The Nikkei
China growth concerns have put a cap on the Asian equity markets' bullish sentiment with the MSCI Asia Pac index retreating from seven month highs. China data confirmed 2022 as a dire year for the region with a meagre 3% annual GDP from 8.4% the year before, confirming lowest levels in 50 years. While Q4 GDP marginally exceeded economist expectations at 2.9% versus 1.6%, down from 3.9% in Q3 22, Asian investors pared support for Chinese equities, investors will be hoping that the contraction in growth may spur further stimulus measures to tackle the economic distress driven by last years strict Covid restrictions.
Uk employment data released earlier this morning has added pressure on the Bank of England who may now be poised to raise interest rates for the tenth consecutive time at their next meeting. While the unemployment rate remained anchored at 3.7% for the three months to November, however, UK wage growth once again topped expectations for both headline and ex bonus metrics, printing 6.4% above the expected 6.2%. The robust data has the UK benchmark FTSE index teerting on break out to new all time highs.
In the Eurozone investor focus this morning will be on the German ZEW survey for January, market watchers are anticipating continued marginal improvement in investor sentiment, the last print was -23.3, analysts are looking for at least a 10 point pick up in expectations, while the current situation view is also expected to improve from the -61.4, further upticks in expectations and the current situation perspectives would suggest the potential for a milder downturn in the Eurozone economy, this comes at a time when Bank of America’s Fund Manager survey shows investors are the most bullish the region since Feb ‘22.
In the US all eyes will be on New York Empire manufacturing data one of many regional surveys due to show where sentiment sits heading into the new year, market watchers are pencilling marginal improvements from -11.2 to -5.0
Markets-wise, all eye are this evenings Bank of Japan meeting, arguably one of the most market moving central bank meetings of the year, although markets don’t expect an explicit policy change, markets are poised for official statements, since the surprise policy adjustment in December, markets are increasingly betting on an end of the decade long Yield Curve Control strategy, investors are poised for volatility with options markets pricing the potential for a 200-285 pip move either side of the spot price going into the meeting, current spot reference is 128.50