Week of Jan. 22: Central Banks, PMI, GDP & Earnings

The week of January 22, 2024, may be an eventful one for many traders and investors as key financial events from the world’s leading economies are set to be released. 

The reports are expected to shed light on the state of the global economy and possibly affect the course of the financial markets. 

Let’s take a look at this week’s main events:

Central Bank Decisions: BOJ, BOC & ECB

The Bank of Japan (BoJ) is expected to conclude its two-day monetary policy meeting on Tuesday, January 23, reflecting the state of the world’s third-largest economy and possibly affecting its economic trajectory in the near future.

While the BoJ’s decision is yet to be revealed, it is believed that factors such as the tumultuous 7.6-magnitude earthquake that struck on New Year’s Day, coupled with indications from BoJ Governor Kazuo Ueda in December stating that the bank is unlikely to reach its target inflation rate of 2% in January, might lead the Japanese Central Bank to maintain its negative interest rates. This is contrary to the initial prediction in December, where a rate hike was expected.

Moreover, factors such as cooling inflation and slower wage growth are expected to contribute to this prediction of a negative interest rate policy.

Overall, more than half of surveyed economists expect the BoJ to raise rates to about 0% from its previous -0.1% while other economists believe that the BoJ will keep rates between 0% and 0.1%.

Following the release, Governor Ueda is set to speak, hence providing further insights into the bank’s decision and its goals. 

Furthermore, in addition to the BoJ, traders may want to keep track of this week’s Bank of Canada’s (BoC) decision on Wednesday and the European Central Bank's (ECB) decision on Thursday whereby both Central Banks are expected to maintain their rates unchanged. 

Flash PMI: Eurozone, UK, US, Japan & Australia 

Wednesday, January 22 is anticipated to be significant as the Purchasing Managers Index (PMI) data for the UK, the US, the Eurozone, Japan, and Australia is scheduled for release. 

Notably, the most recent global PMI data from December revealed an upswing in the acceleration of the worldwide economic expansion. 

Nevertheless, it is crucial to emphasize that the broad growth conceals divergences that have expanded across regions and sectors. Moreover, despite the overall advancement in the global economy, noticeable disparities persist among various regions and sectors. 

Accordingly, this might suggest that specific areas and industries may be undergoing robust growth, while others are falling behind. Only time will tell what the PMI releases will reveal.

US Q4 GDP

Gross Domestic Product (GDP), a key inflation measure favored by the Federal Reserve, is set to be released this week on Thursday, January 25. 

According to analysts at Bloomberg, the full-year GDP for 2023 is expected to increase by 2.7%, above 2022's 0.7%, with the total production of goods and services showing an annualized 2% increase. 

This follows a 4.9% advance in the third quarter of 2023, marking the strongest consecutive quarters of growth since 2021. However, there are concerns that growth may deteriorate in the first six months of this year, influenced by challenges in the labor market, consumer demand, and credit availability.

Interestingly, despite these less-than-rosy factors, overall inflation is slowing down, hence increasing the chances of a Federal rate cut. 

All in all, as a confluence of conflicting factors emerges, there is increased uncertainty surrounding the upcoming release. (Source: Bloomberg)

Earnings Releases

A series of earnings releases across diverse market sectors is scheduled, featuring noteworthy reports such as Tuesday's Netflix (NFLX) release, Wednesday's Tesla (TSLA) report, and Thursday's significant tech earnings from Intel (INTC). The main focus will be on assessing the impact of artificial intelligence on the tech industry.

Seeing what these companies' results will be can be helpful to stock traders and consumers alike. 

Conclusion

The week of January 22, 2024, can hold pivotal moments for traders, investors, and consumers. 

Uncertainty surrounds the Bank of Japan's decision, while the Bank of Canada and European Central Bank are expected to maintain rates unchanged.

In addition, Wednesday's PMI data reveals potential economic divergences, and Thursday's US Q4 GDP forecasts a 2.7% increase for 2023 amid labor market concerns.

Lastly, earnings reports from companies like Netflix, Tesla, and Intel are expected to showcase AI's impact on tech. 

Traders will have to wait and see what this week reveals as we dive deeper into the new year.