GB Market Commentary 12/01/2023
by Marcus Sotiriou
Investors are carefully anticipating today’s critical inflation report, which will provide us with US CPI data. Bitcoin is rallying ahead of the data being released, as CPI is expected to decrease by 0.1% month-over-month, and headline year-over-year CPI is expected to decrease from 7.1% to 6.5%.
JP Morgan predict that the S&P 500 will rally 3 to 3.5% on news of CPI being less than 6.4%, 1.5% to 2% on CPI being 6.4% to 6.6% and, drop 2.5% to 3% on CPI being above 6.6%.
I am optimistic that CPI will be lower than, or the same as, expected due to the CPI fixing market predictions. A report from Morgan Stanley shows that the CPI fixing market has predicted the direction of the surprise relative to the expected CPI print for the past 10 prints. For the month of December, CPI fixings is predicting a downside surprise of 0.13%.
Morgan Stanley also release some data to back up this prediction, as labour market continues to slow. The monthly US nonfarm payroll changes show a deceleration, which relates to job gains and earnings growth. In addition, hours worked are shown to be contracting, as average weekly earnings and average weekly hours are both slowing.
Furthermore, ISM manufacturing and services data are both showing a convincing contraction in recent months.
Bitcoin is currently facing resistance at $18,100, but today’s CPI news could provide some hope for the outlook of global markets and crypto in 2023.