US and European futures are trading soft today as traders are paying attention to the renewed commitment from Chinese health officials who have decided to stick to their strict covid related measures. Last week there was a lot of optimism around this matter as investors were hoping that authorities in China would change their minds. Finally, we would hear more relaxed measures from China concerning covid, which is dragging economic growth in the world’s second-biggest economy. The economic data out of China has also damped the sentiment as the Chinese trade data fell short of expectations by a large margin. The trade data recorded the first annual export decline since May 2020, when the whole world came to stand still due to covid. The export numbers fell by 0.3%, and the import data declined by 0.7%. The forecast has been for an increase in export of 4.3%, and for imports, the forecast has been 0.1%.
In addition to this, traders are still in the process of digesting the US NFP data, which was released last Friday. The data was mixed, and the message taken by traders and investors was that the numbers do not warrant the Fed keeping its foot on the gas when it comes to hiking the interest rate in the US. Since then, hopes are fuelled that Fed will take a gentle approach and we will not see another interest rate hike of 75 basis points from the Fed. Remember, the RBA has already initiated this process and is done with its front-loading of interest rate process. Traders are hoping that this is something they will see from the Fed and other central banks as most of these banks follow each other’s policies as global economic challenges tend to mimic.
In terms of stock to watch this week, Meta’s news which came over the weekend, has made investors more nervous today. The company is expected to announce large-scale layoffs, which could happen as early as Wednesday. Meta is expected to let thousands of people go, which would be the first time in the company’s history to announce such significant firings. Zuckerberg already said that the company’s focus in 2023 is to improve some of its priority growth areas. If the company is going to lay off thousands of people from the virtual reality sector, it would mean that the company may be changing its strategy altogether.
Berkshire Hathaway’s stock will also be an interesting one to watch today as the company announced its solid gains during the third quarter over the weekend and is still committed to buying more stock. During the third quarter, Buffett continued to buy the decline in Occidental Petroleum’s stock, bringing Berkshire’s holding in the oil giant up to 20.8% of its total value. In August, Berkshire was granted regulatory authority to purchase up to fifty per cent of Occidental, which sparked rumours that the company may eventually acquire the entire Houston-based company.
Gold prices are retracing from their recent highs on the first trading day of the week as the dollar index gains some of the lost ground. Traders and investors know that the path to the least resistance in the dollar index is skewed to the upside as the Fed isn’t done with monetary policy. Yes, the chances are low that the fed may not increase the interest rate by 75 basis points during their next meeting, as four members of the fed committee have said that the central bank should start thinking of lowering the speed of rate hikes. However, what is very important at the same time is that inflation is very much anchored in place. As long as we do not see inflation readings easing off, the prospects of inflation numbers going down are very low.