(Repetition without change of a dispatch broadcast Friday)
by CORENTIN CHAPRON
The American and European central banks will meet in the coming days as corporate results continue to be published on both sides of the Atlantic, and as China prepares to celebrate the Lunar New Year.
Overview of market prospects in the coming days:
1/ THE FED FACING TRUMP
The Federal Reserve’s (Fed) next decision on Wednesday should not surprise investors – markets expect rates to remain at their current levels and US monetary policy makers have made numerous declarations to this effect.
However, observers will be attentive to the institution’s comments on the measures taken by President Donald Trump, which could fuel price dynamics.
The Fed could also comment on the increase in American sovereign yields in recent months, despite its rate cuts: the 10-year US10YT=RR reached its highest level since November 2023 in mid-January, at 4.81%.
Markets are in fact anticipating a more lastingly restrictive monetary policy, and the question now is whether these high yields will pose a problem for American assets.
“The impact on the markets will depend on the risk of a resurgence of inflation,” summarize the strategists at Goldman Sachs.
It is up to the Fed to dispel, or not, some of these concerns.
2/ CONSENSUS A LA BCE
Unlike the December meeting, the next decision of the European Central Bank (ECB), on Thursday, seems to have a consensus within the governing council.
“The main reason for the ECB’s more accommodating attitude is its terminal rate forecast formulated in December, below 2%,” summarize ING strategists. The deposit rate currently reaches 3%.
“Added to this are the increased risks for the growth of the euro zone arising from the possible economic policies of the new American administration”, and which justify already easing economic conditions, underline the analysts.
The ECB could nevertheless have to deal with a marked weakening of the euro against the dollar, as the rate gap with the United States widens: if the central bank does not act according to the exchange rate, a Too weak a currency would make imports, particularly energy, more expensive, thus creating inflation.
3/ THE MAGNIFICENT 5
Publications from American companies continue: Apple, Tesla, Microsoft, Meta Platforms and Amazon.com are notably expected in the coming days. The theme of artificial intelligence (AI) should remain buoyant.
-“Despite concerns around monetization of AI and overinvestment, hyperscalers (companies offering large-scale data storage) have once again pointed out that they are engaged in an arms race in AI. AI,” write BofA analysts, who believe that spending in the sector should remain strong.
However, business growth was not limited to the technology sector at the end of last year: the figures published so far have clearly surprised on the upside, with earnings per share announced by companies being 10% higher than consensus on average, compared to 5% during the previous quarter.
Investors are also paying attention to the positioning of companies regarding the measures announced by Donald Trump. HP Inc and Home Depot have discussed their efforts to diversify their supply chains and limit their exposure to China.
4/ RESULTS IN EUROPE, ALSO
The good figures published by Zalando, Richemont, Burberry and even Adidas give hope for an inflection point for European values, as the results season begins.
“Despite a somewhat weaker macroeconomic environment, profits in the fourth quarter should be supported by favorable year-on-year base effects,” emphasize Deutsche Bank analysts.
According to data from LSEG I/B/E/S, Stoxx 600 companies are expected to record a 1.5% increase in profits in the fourth quarter year-on-year, or +4.9% excluding energy.
A good surprise would support the dynamics of the European markets – the Stoxx 600 has increased by 4.8% since the beginning of January and is at a historic high – but investors will remain attentive to sectoral results, while political, economic and monetary uncertainties remain. high.
LVMH LVMH.PA figures are expected on Tuesday and will constitute a key test: luxury has been one of the main brakes on the performance of European markets in 2024, and the sensitivity of the sector to the Chinese economy could again weigh on the indices this year.
5/ CHINESE NEW YEAR
China will celebrate the Year of the Snake on Wednesday, an auspicious symbol that Beijing may well need to extricate itself from its economic slump.
“China’s GDP growth in the fourth quarter accelerated thanks to exports and stimulus measures, but the recovery remains fragile,” summarize the economists at Société Générale CIB.
Donald Trump nevertheless adopted a more conciliatory tone towards Beijing and moved away from the prospect of punitive customs duties of 60%.
If this scenario materializes, the budgetary support announced in December would be sufficient to allow the country to grow stably, with a growth target of 5%, estimate the bank’s economists.
The “Two Parliamentary Sessions” on March 5 will give more details on the support measures, the budgetary package and the economic objectives announced at the end of last year.
(Written by Corentin Chappron, edited by Blandine Hénault)
