Daily Market Outlook, January 20, 2023

Chinese Market Head Into Lunar New Year Near Bull Market Territory
Asian equities close out the week on a firm footing as Chinese investors wind down ahead of next week’s lunar new year holiday. Western markets remained subdued as FOMC vice chair Brainard, deemed to be in the dovish camp, made remarks that were more aligned with the ‘higher for longer’ view on US interest rates . European Central Bank Chief Lagarde appearing at the World Economic forum in Davos also struck a hawkish tone in her speech, stating that inflation remains “way too high”, Lagrade speaks again today and is likely to reiterate her hawkish stance.
UK data out this morning confirmed concerns regarding the UK consumer as January GfK consumer confidence dropped to -45 from -42 in December, although still at depressed levels this print remains above the record lows seen in September -49, however, sentiment with respect to UK personal finances for the year ahead showed some signs of improvement, retailers will take little solace from this given December retail sales dropped for a second consecutive month, declining 1.0%, led by lower non-food sales while grocery sales were modestly weaker. The ONS highlighted that consumers were cutting back due to increased prices and ongoing affordability concerns linked to the cost of living crisis.
In the Eurozone, German producer price inflation retreated for a third month in a row to print 21.6% in December from 28.2% in November.
US existing home sales data due later today, is expected to show another decline as the restrictive rate environment continues to weigh on home buyers' appetite, if the data confirms another drop, this would mark the eleventh consecutive decline in home sales stateside . Ahead of next week’s blackout period for Fed officials, the Fed’s Harker and Waller are both on deck today, Harker has recently suggested he would be more inclined to back a 25bps rate move at the next meeting, markets will look for additional colour on his views today.
Markets-wise, investors are nursing losses heading into the weekend, US markets have been on the back foot with the benchmark SP500 testing pivotal support at the 3900 level, however, European markets are clinging to modest gains at the open of trade. Commodities remain front and centre with WTICrude reclining the $80 handle to trade back above $81 per barrel, Gold also regained its shine, as the yellow metal remained supported above 1900 bulls keep their sights on a test 1950, the Dollar continues to rotate around the 102 mark, as the Euro continues to cling to 1.08 buoyed by Lagarde’s hawkish rhetoric.