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Markets TL;DR: Recession fears up, inflation down, crypto flat & stocks drop

1. Economy 

  • The World Economic Forum is currently taking place in Davos, Switzerland. Geopolitics is front and centre, with transatlantic trade tensions taking centre stage. 
  • With inflation numbers softer recently, attention is being drawn to the employment market. Microsoft announced it is laying off 5% of its workforce globally, amounting to 11,000 roles, the latest tech company to pare back operations. 
  • The next big date on the calendar is February 1st when the Fed meets to decide on the latest monetary policy. 
  • The US is slated to hit the debt ceiling today, a largely bureaucratic limit on government spending, but a piece of legislation that could be used to bargain for spending cuts or other political chips, with Republicans holding a fresh majority in the House. 

2. Stock market

  • Stocks have pulled back this week, as below-expectation earnings arrived in investors’ mailboxes. 
  • Disappointing data for US retail sales and industrial production has sparked greater fears of an imminent recession. The S&P 500 has dipped back below 4,000. 
  • Netflix earnings will come out today and could be a potential barometer for the tech sector following a few tough months and large-scale layoffs, alongside the continued burden of high interest rates on the sensitive industry.  

3. Crypto

  • Crypto is trading relatively flat this week, meaning it is still flying on the year.
  • Binance has won regulatory approval in Poland. Coinbase announced the disappointing news that it is pulling out of Japan, as the exchange continues to reel – it is up 50% in the last two weeks but still down 85% off highs. 
  • The founder of Bitzlato, a Hong Kong-based crypto exchange, was charged with $700 million of financial crimes. Genesis looks like it is finally set to file for bankruptcy after getting caught up in the FTX collapse, a move that the market has expected and likely largely priced in. 
  • The Fed meeting on February 1st is bound to inject volatility into the digital space, as crypto continues to trade off macro news. 

4. Other assets

  • Mortgage demand jumped 28% in a week following a decline in average interest rates, giving real estate investors a boost, despite a recession appearing more likely.
  • Gold has pared back in the last couple of days but still remains within range of its all-time high. The metal has risen off the back of increased recession expectations and a view that the Fed could become less hawkish.    

What to look out for

  • Overall, the Economic Forum in Davos and earnings in the stock market are taking headlines right now. 
  • Other than that, the main story is the increased expectations of a recession overtaking inflation as the greatest concern for the market. 
  • The Fed meeting on February 1st presents as the next pivotal date, when the latest monetary policy will be revealed and volatility should be expected

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