This week, the focus was on traditional markets with a great deal of economic news; it is the hot phase of earning season.
Crypto has been “swimming along” and saw another positive week contributing to the current upward trend. BTC is up 2% since last Friday to USD 23,500 and ETH is trading 3.8% higher at USD 1,640.
Economic figures this week were mixed. Preliminary Q4 GDP prints for Germany came in slightly lower, while they surprised a bit on the upside for France and Italy. Retail sales in December disappointed across the board in Japan, Australia, Germany, and Switzerland, showing weakening consumer confidence. The ECB lending survey added to the picture of slowing economic activity. The report showed the largest loan tightening of banks in the eurozone since the 2011 debt crisis.
Positive news came out of China with manufacturing and non-manufacturing PMI both above 50 again, indicating an expansion after the government stopped almost all Covid measures.
On Wednesday evening, the FED hiked rates by 25 bps as expected to a new benchmark federal funds rate of 4.5-4.75%. Jerome Powell tried to make it clear that even inflation has begun to slow, and that the FED is not thinking about changing course. He expects further rate hikes to come. He also mentioned that he sees it as unlikely that there will be rate cuts this year. A bit surprisingly, the market did not interpret all of this as hawkish; the Nasdaq ended the day 2% higher and added another 3.25% yesterday. Cleary, the market seems not to fully believe Powell: at the moment, there is another 25 bps rate hike priced in for the March meeting. Afterwards, the market is expecting stale rates with the highest likelihood for the final rate of 2023 to land a bit lower at 4.25-4.5%, explaining the current rally we see, especially in growth stocks. After all said and done, whoever is right will largely depend on the future path of inflation. January CPI data for the US will be released on February 14th and will provide some indications.
In other news, Coinbase rallied almost 24% yesterday after news came out that a federal judge in New York dismissed a class-action suit against the exchange claiming Coinbase was selling unregistered securities.