Markets gradually gain momentum as we navigate from bank holidays in the beginning of this week to intriguing releases of Eurozone inflation and the US labour market data including NFP. Today, Alex Kuptsikevich, Senior financial analyst at FxPro shared with us his thoughts on inflation in the Eurozone, US data and striking decreases of major tech stocks like Amazon, Apple, Tesla and Alphabet.
A preliminary estimate for Germany showed a price decline of 0.8%, after 0.5% a month earlier and a stronger-than-expected 0.6%. Annual inflation slowed to 8.6% from a peak of 10.4% in October. Years of disinflation have created a pattern so excessive price pressures will ease quickly in the first phase. As commodity and energy prices fell and overall demand began to weaken, sellers started to adjust prices. Elsewhere in the eurozone, price volatility is likely lower than in Germany. However, the indicators could also produce a few dovish surprises in the coming months.
However, it must be remembered that the annual price growth rate has already slowed down from the second quarter, and the ECB will show determination in bringing inflation to "just under 2". Therefore, we do not expect the slowing CPI to be a negative factor for the single currency in the coming weeks. Perhaps even the opposite: the euro will become attractive to speculators by retaining more purchasing power.
The minutes of the meeting is unlikely to come as a surprise to the markets. We see much more intrigue in the upcoming NFPs. Average analysts' forecasts are predicting another 200k jobs for December. In our view, several previous reports have been surprisingly strong, accustoming analysts to making more robust forecasts. However, NFP is a very unpredictable indicator. Its weakly positive values, or even negative numbers, could shock the markets, changing the game for the coming weeks. We urge you to be mindful of such a scenario.
Tesla has lost over 75% of its peak at the end of 2021 but is almost four times more expensive than it was at the March 2020 lows. That said, many "pandemic stars" have regained all the gains of that period. From that perspective, Tesla still has significant downside potential. However, looking short-term, the stock is clearly oversold and will likely correct some of its losses in the coming weeks. This will be especially true if management or the company's founder begins to take steps to stabilise the company's capitalisation.
Apple has bounced back from its peak far less than others and technically has room to decline in the near term down to $115 before the drop starts to look threatening. Alphabet and Amazon look helpless, having rolled under critical technical levels. These big growth companies are under the weight of high-interest rates in the financial system and a slowing global economy, so they may not only decline further in the coming months. Still, they will probably be worse than the market for years to come. Investors should look for new stars in long-term portfolios, realising that the world began a new period in the long-term macro cycle last year.
