©Reuters.
By Peter Nurse
Investing.com — The UK economy narrowly avoided a recession in the fourth quarter as the race for the new Bank of Japan governor takes a surprising turn. Crude oil prices shot up after Russia announced it would cut production in March. Shares are set to open lower, with lyft tumble after a disappointing update while the Michigan Sentiment Index will also be in focus. Here’s what you need to know about the financial markets on Friday February 10th.
1. The UK is avoiding a tech recession…for now
The UK economy narrowly avoided entering a recession in the last quarter of 2022, with data released earlier on Friday showing the country’s flat in the fourth quarter after a revised 0.2% contraction in the July-September period stayed.
This meant the UK economy dodged consecutive quarterly contractions, the definition of a technical recession.
However, it fell 0.5% in December alone, suggesting that this is merely delaying the inevitable.
“January PMI surveys suggest activity has softened at the start of the first quarter of 2023 and we are currently seeing GDP contracting by 0.3% q/q,” said Adam Cole, strategist at RBC Europe.
2. Yen rises on surprise BOJ Governor’s report
The Japanese yen rose on Friday after a report in the influential Nikkei newspaper that Prime Minister Fumio Kishida will nominate Kazuo Ueda, a professor and former Bank of Japan board member, for the role of central bank governor from April.
By 6:00 ET (11:00 GMT) it was trading 0.5% lower at 130.88.
Masayoshi Amamiya, BOJ deputy governor and a well-known dove, had been widely expected to fill the role, but the newspaper reported that he declined to take the post.
Amamiya was seen as likely to continue the central bank’s ultra-loose monetary policy, which pushed the yen to its lowest level in 20 years against the dollar last year.
Ueda’s potential appointment came as a surprise and it’s hard to say what that would mean in terms of the bank’s near-term monetary policy stance. But the market sees this as a departure from the status quo.
3. Stocks will fall; Lyft collapses after disappointing update
US stock markets are expected to open lower on Friday as investors digest more hawkish Fedspeak investors and raise concerns about the next rate hike by the central bank.
By 6:00 ET (11:00 GMT), they were down 60 points, or 0.2%, while down 0.4% and 0.8%.
The President of the Federal Reserve Bank of Richmond on Thursday became the latest policymaker to stress the importance of continuing to raise interest rates to fight inflation.
This appears to have dashed hopes of an end to the Fed’s aggressive rate hikes anytime soon.
The three major averages are all on course to end the week lower. The is down 1.3% this week, the DJIA down 0.6% while the is on a weekly loss of 1.8%.
Lyft (NASDAQ:) shares fell over 30% premarket after the ride-hailing company suffered a surprise fourth-quarter loss and disappointing guidance as rising costs squeezed margins.
PayPal (NASDAQ:) stock also fell 1% after the payments heavyweight’s warning of pressure on discretionary spending overshadowed its forecast of better-than-expected full-year earnings. It also announced that Chief Executive Dan Schulman will retire in late 2023.
4. Michigan Consumer Sentiment Index due
The key US data release due Friday is February, a widely watched measure of personal consumer confidence in economic activity.
The index hit its highest level in eight months in January as falling energy prices allayed inflation fears, rising to 64.9, the highest since May, from 59.7 in December.
It is expected to rebound to 65.0 by 10:00 ET (15:00 GMT), although the first rise in six weeks offers the potential for a downside surprise, according to data released Thursday.
5. Crude Oil Rise Amid Russian Production Cut
Crude oil prices rose to new two-week highs on Friday after Russia announced plans to cut its oil production by 500,000 barrels a day in March in response to international sanctions.
“Russia believes that the mechanism of price caps for Russian oil and petroleum products is an interference in market relations and an extension of the destructive energy policies of the collective West,” Deputy Prime Minister Alexander Novak said in a statement on Friday.
The move, equivalent to withholding around 5% of the country’s January production, threatens to further tighten a market expected to see rising demand from China as the world’s largest importer recovers from its tough COVID-related restrictions.
By 6:00 a.m. ET, futures were up 2% to $79.60 a barrel while they were up 2.1% to $86.23 a barrel.
The Baker Hughes is due later in the session and traders will see if there is a bounce to allow production to rise to offset. Baker Hughes reported 599 rigs last time.
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