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Market wrap-up — February 6, 2023

That was an intense week! On the macro side we had both the Fed Chairman and the ECB President announcing their rate moves but also earnings from major tech companies.

Let’s start with the tech giants. Apple, Amazon and Alphabet all published rather disappointing results on Thursday.

Amazon, despite higher net sales, printed a sharp drop on the next day and closed almost 9% lower as its profit growth slows down, mainly because of lower company spendings on advertisement. Same picture for Alphabet.

Up to that day, the week was okay, and investors were rather in a good mood as Jerome Powell sounded less hawkish than expected and raised rates by only 25bps. The Bank of England and the Bank of Canada also gave markets the impression that the rate hiking cycle will be coming to an end in a not-so-distant future. Meta helped boosting the sentiment by beating expectations on its top line, by increasing its share buybacks and working on expenses. Its stock shot up by 20% in a single trading session.

Talking about +20%, the Nasdaq 100 index is now back in bull market territory, after a 20% rebound since its low of October. The S&P 500 is also getting close to that famous threshold.

The risk appetite has grown in the trading floors around the world as it’s increasingly difficult to ignore stock performances since the beginning of the year. Staying on the sidelines becomes harder as both retail clients and asset managers are piling back into equity markets. The top gainers are tech and consumer discretionary companies.

On Friday though, super strong US job reports came in and jubilation made room to renewed worries that more tightening come be ahead of us.

Do you remember when I said last week that “job reports will also be a good gauge about how resilient the US economy is after the rate hikes”? Well, resilience was not a strong enough word. The United States created 517’000 jobs in January versus 188’000 expected by economists, that was quite a surprise

It reminded investors that central banks might not be done with trying to slow the economy down. German bonds immediately gave up half of the performance from the previous day. Interestingly, better US job reports worried European investors more than the 50bp hike the day before, despite Lagarde’s warnings on underlying inflationary pressures. Go figure.

One explanation could be that after a tough 2022, the FOMO is real, and investors tend to jump on any good news or anything that looks like one. Coinbase stock largely benefited from that risk on mode as it shot up 100% higher than it was on the first trading session of the year. But still, since end of last week, bitcoin is slowly losing some ground. After 3 weeks of steady gains, one can argue that a breather was anyway probably needed. Let’s see where we go from here.

Johan Thomyris

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