European and US futures are trading mostly flat as traders are questioning the message which is coming out from mega-tech. Meta had disappointing earnings, and the stock tumbled last night, but the game is still not over yet for big tech, as Amazon and Apple will still have to report their numbers this week.
Meta’s stock price plummeted last night due to its weak fourth-quarter forecast and fragile earnings numbers. The biggest loss for the company comes from its Reality Labs division which lost over 9 billion during the past three months. The earnings per share (EPS) came in at $1.64 against the market expectations of $1.89 and its revenue also fell short of expectations. The daily active user number was the bright spot for the company, which matched the expectations—the number came in at 1.98 billion, and the monthly active user number surprised investors to the upside with the reading of 2.96 billion vs 2.94 billion forecasts.
The eCommerce giant Amazon will report its earnings today after the US market close, and the forecast for its EPS is $0.22, while the reported EPS for the same quarter last year was $0.31. So, the bar is already set, and if the company fails to impress on this number, the consequences are likely to be dire for the company.
Today is an important day, as it is today that we see the ECB announcing its monetary policy decision. The expectation among investors and traders is that the bank will announce an interest rate hike of 75 basis points. Let’s look at the number of the governing council and plot them on the chart showing members who like to have a dovish policy against hawkish. We see that there are more members of the governing council who are in support of front loading—and that is: increase the interest rate more aggressively now. Basically, their view is that the bank needs to increase the interest rate urgently and aggressively, and the rest can be done later.
The President of the European Central and her comments are going to make all the difference when it comes to sentiment and the strength/weakness of the Euro. We anticipate the president is likely to reinforce her position on QT (Quantitative Tightening) which is that the bank will embark on its QT after interest rate normalisation, but pinning a date on this will be a difficult task, and she is likely to avoid much information on that.
As for the markets, aggressive moves on the monetary policy i.e., an interest rate hike of 75 basis points, usually bring ripple waves in the bond markets. But the ECB has prepared the market very well, and as one of the fragmented markets in Europe, such as Italy, bond traders are fully ready for it, and a large part of the move is already priced in it. As for the EUR/USD pair, we have also seen a decent amount of strength coming back to it, and this is bought the Euro back to parity. Any further strength in the Euro or moves in the bond markets is likely to be coming from future interest rate hikes. Now, the bank certainly hopes to increase the next interest rate in December by 50 basis points, and the one following that, it aims to increase it by 25 basis points. These two interest rates are going to be highly important for market players as they will need to know the position of the bank in December and the month following those.
Bitcoin and Ethereum had a pretty good run in the past two days, and it got many traders excited by making them think that the bulls may be finally getting ready to push the price higher. However, that could be incorrect, as what we want to see is the consistency of the momentum, and by looking at the price action, it doesn’t seem that way. However, it is important to remind investors and traders that usually, the rally for cryptos comes during these months because in the past, when bitcoin broke above the 10K price mark, it was actually the winter months, and that led the price to skyrocket to all the way to 20K. so history can repeat itself and the next couple of months could be interesting ones for the cryptos.