Stock markets drift lower before Fed decision; German consumer morale drops – business live | Business

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Microsoft released stellar results last night as the Covid-19 pandemic sparked a boom in PC sales and video gaming and drove higher usage of the company’s cloud services. The Xbox and PC maker posted a 17% increase in revenues to $43.1bn between October and December, which beat forecasts. Profits jumped 33% to $15.5bn, sending Microsoft shares to a record high.

Today, Facebook, Tesla and Apple are due to release earnings after Wall Street closes.

Apart from the tech results, the main event is the US Federal Reserve’s policy decision at the end of its two-day meeting – the first in 2021. It is expected to leave policy unchanged and stick to its ultra-loose stance: i.e. near zero interest rates and $120bn of bond purchases every month and other liquidity relief measures to help the Covid-ravaged American economy.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

And there will certainly be no hint of a policy tightening, or tapering in the foreseeable future, given that the health crisis has not been losing speed with the mutation of the virus and delay in vaccine distributions across the globe. It appears that Joe Biden has been too optimistic about getting anyone who wants vaccinated by the end of spring. It is now said that end-of-summer is a more realistic target, if all goes well with the production and the distribution of doses.

Speaking of that, the unconsidered scarcity in vaccine doses may turn the trade tensions between the US and Europe that emerged under Trump administration into a vaccine war, as Germany now threatens to retaliate over the US trade restrictions by limiting AstraZeneca’s vaccine exports. No one saw that coming.

As such, the latest developments around the vaccine are bad enough to keep the Fed doves in charge.

Consumer confidence in Germany has fallen for a fourth month heading into February, not surprising given that the country is in another coronavirus lockdown. Chancellor Angela Merkel and state leaders agreed last week to extend the lockdown until mid-February.

The GfK research institute said its consumer sentiment index, based on a poll of 2,000 Germans, fell to -15.6 points from a revised -7.5 in January. It is the lowest reading since June. GfK researcher Rolf Bürkl said confidence was likely to remain muted into March.

Asian markets are mostly higher after a choppy session, with Japan’s Nikkei closing 0.31% higher while Hong Kong’s Hang Seng slipped 0.1% and the Australian stock market fell 0.72%. We are expecting a mixed open for European markets.

The World Economic Forum’s annual meeting – digital Davos – continues today. This afternoon there are a series of sessions devoted to discussing net zero and climate change, including one with the former Bank of England governor Mark Carney, now a UN special envoy for climate and finance, and Al Gore, the former US vice president and environmentalist. Carney has also joined the Canadian fund manager Brookfield Asset Management to spearhead environmental and social investing.

WEF sessions:

  • 1pm GMT: on Net Zero with Mark Carney and Al Gore
  • 3pm GMT: on Climate change with Alok Sharma, president for COP 26, and Shell CEO Ben van Beurden
  • 5pm GMT: on Net Zero aviation with UK transport secretary Grant Shapps
  • 6pm GMT: Carbon markets with Bill Gates, Mark Carney and Standard Chartered CEO Bill Winters

The Agenda

  • 1:30pm GMT: IMF Global Financial Stability Report
  • 1:30pm GMT: US Durable goods orders for December (forecast: 0.9%)
  • 7:00pm GMT: US Federal Reserve interest rate decision
  • 7:30pm GMT: Fed Press conference


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