US and European futures are trading lower even though the IMF painted a more optimistic picture of the global economy. Investors and traders remain fully focused on the upcoming Federal Reserve meeting, which begins today and concludes tomorrow. The main question for them is how far the Fed can stretch the interest rate equation and if they will be slowing down the pace of interest rate hikes. Nonetheless, the S&P 500 index is still set to record its best performance in January, going back all the way to 2019. Nearly 20% of the S&P 500 companies are reporting their earnings this week, which will be another key test for the index and it will determine the future path of the S&P 500.
IMF
One of the factors that could add some optimism in today’s session is the fresh outlook projection by the IMF. The International Monetary Fund (IMF) raised its global growth predictions for the year. The International Monetary Fund (IMF) predicted in its most recent economic report that the global economy would expand by 2.9% in 2018, which is an increase of 0.2 percentage points from its previous projection made in October. Despite this, such a figure would still represent a decline from the expansion of 3.4% seen in 2022. In addition to this, it lowered its prediction for 2024 by 3.1%.
The reason that the IMF has changed its outlook is because of domestic variables in several nations, including the United States, which have been doing better than projected. The prognosis for the economy of the whole world has improved. It is observed that economic growth proved to be more resilient in the third quarter of last year than the previous forecast. In addition to this, the institute also noted that inflationary pressures have decreased.
Strong labour markets, robust household consumption, business investment, and better-than-expected adaptation to the energy crisis in Europe” were some of the factors that contributed to this unexpectedly robust performance.
Not everything was rosy in the IMF’s fresh outlook. The International Monetary Fund issued a warning about several variables that, in the coming months, might make the picture worse. These included the possibility that China’s Covid reopening could be delayed if the situation continues to get out of control as the covid numbers increased sharply during the covid period.
The bank warned about inflation and it said that inflation could remain high even though it has come off its highs. The most important cautious warning that traders and investors need to keep an eye on is on the war front— the conflict between Russia and Ukraine. This war seems to be never-ending for the time being and it could have further adverse influences such as a further shake-up in energy and food prices. The net output could make the picture more pessimistic due to inflation prints.
The Data from China
According to the National Bureau of Statistics, China’s official manufacturing purchasing managers’ index (PMI) reported growth for the first time since October 2022. This was the longest stretch without an expansion. The reading for China’s manufacturing activity in January was 50.1, which was higher than the threshold of 50 points. This separates expansion from contraction. The measurement is higher than the level that was recorded in December, which was 47, and above the expectation that Reuters had of 49.8. In a similar fashion, China’s non-manufacturing PMI increased to 54.5 in January, up from 41.6 in December. This index includes the construction, catering, and service industries.
Earnings
2022 was a terrible year for the whole advertisement industry and that shaved billions of dollars from the market cap of stocks such as Meta, Snap, and others. However, 2023 is expected to be a different one as investors and traders are beginning to develop a greater appetite for the online advertising market. The anticipation among them is that this year they will see a comeback in this sector’s financial performance.
Starting today, the largest companies in the space will report their financial results for the fourth quarter and provide an update on whether brands are starting to spend more on advertisements after pausing many of their campaigns. As a result, those involved are hoping to see some signs of recovery during this week.
On Tuesday, after the market has closed, Snap is going to release the company’s quarterly earnings. On Wednesday, Meta will report, and on Thursday, Google’s parent company, Alphabet will do the same. Amazon and Apple, two companies with rapidly expanding digital advertising operations that have been gaining market share recently at the expense of industry leaders Google and Facebook, will both address investors on Thursday.