PCE Prices, Intel slump, Adani woe - what's moving markets

© Reuters

By Geoffrey Smith 

Investing.com -- Intel tells a tale of woe for the chipmaking segment. The U.S. releases December data for the inflation measure that the Fed really cares about. It will take a big shock to shake expectations of a 25 basis point rate hike next week, though. The Eurozone economy may be reacting more quickly to the ECB's rate hikes than expected, as loan growth slowed sharply in December. Oil breaks through resistance and the paper wealth of Asia's richest man is going up in flames after a blistering short report. Here's what you need to know in financial markets on Friday 27th January.

1. PCE prices and personal spending data

After a surprisingly strong first reading for fourth-quarter GDP growth, the U.S. will publish the figure the Federal Reserve cares most about at 08:30 ET (GMT 13:30): the core personal consumption expenditures price index for December.

Headline inflation, as measured by the consumer price index, may have been declining steadily for the last six months but core PCE inflation has only recently started to trend downward, and the Fed will be eager to see that trend continuing ahead of its policy meeting next week.

Analysts expect a modest acceleration to 0.3% in price growth, with a decline to 4.4% in the annual rate from 4.7%. It will take a big deviation to change a consensus view that a 25-basis point hike next week is nailed on. 

There are also pending home sales data and personal income and spending numbers for December, along with the final reading of the Michigan Consumer Sentiment index.

2. Eurozone lending slows as ECB hikes

The European Central Bank’s interest rate hikes are having an effect already. Lending to private-sector companies and households grew at the slowest rate since April 2021 in December, with credit to non-financial corporations slowing particularly sharply.

The impact, detailed in the European Central Bank’s monthly monetary data, suggest that 200 basis points of tightening has worked faster on the Eurozone economy than in the past. Whether that will be enough to persuade the bank from raising its key rates by 50 basis points next week is another question. The market is currently pricing in a high chance of two successive 50-bp hikes at the bank’s next meeting.

The euro reversed early modest gains on the news but was still down only 0.1% by 06:30 ET.  However, 10-year Eurozone bond yields rose by as much as 10 basis points, amid nervousness that the ECB could trigger a recession that tests the single currency zone’s cohesion.

3. Stocks set to open lower; Intel slumps on wide loss, bleak forecast

U.S. stock markets are set to open lower later, dragged down by an alarmingly weak set of numbers and guidance from chipmaker Intel (NASDAQ:INTC) late on Thursday. Intel reported a slump in sales a loss that was twice as wide as expected. It also said it will lose money in the current quarter and that global PC shipments will be at the low end of its forecast range this year.

By 06:30, Intel was down nearly 10% in premarket, erasing almost all of its 2023 gains.

Tech stock futures underperformed on the read across to other chipmakers such as Advanced Micro Devices (NASDAQ:AMD). Nasdaq 100 futures were down 53 points, or 0.4%, while S&P 500 futures were down 0.2% and Dow Jones futures were largely flat.

Stocks still look as if they will end the peak week of earnings season higher, having shaken absorbed poor numbers from Intel, Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM), among others to focus on more positive stories such as Tesla (NASDAQ:TSLA) and Chevron (NYSE:CVX).

Chevron missed forecasts for its fourth-quarter earnings earlier, but is set to be supported by its $37 billion buyback announcement earlier in the week. Others reporting Friday include American Express (NYSE:AXP), Charter Communications (NASDAQ:CHTR), Colgate-Palmolive (NYSE:CL) and HCA (NYSE:HCA).

4. Adani selloff gathers pace

The selloff in stocks controlled directly and indirectly by Gautam Adani deepened in the wake of Hindenburg Research’s short report earlier in the week.

Adani, who was Asia’s richest man on paper at the start of the week thanks to the valuation of his portfolio companies, has seen his empire lose $50 billion this week. The flagship holding company Adani Enterprises (NS:ADEL) fell as much as 20% intraday in Mumbai and barely recovered before closing down 18.5%.

Adani’s group has said it is exploring legal action against Hindenburg. Investor Bill Ackman by contrast praised the report as “highly credible and extremely well researched.”

5. Oil breaks resistance; CFTC positioning data due

Crude oil prices broke through resistance to trade 1.5% higher, amid signs that geopolitical risk premiums may rise again in the near future as Russia responds to European and U.S. decisions to send heavy armor to Ukraine.

By 06:45 ET, U.S. crude prices were testing a two-month high, rising 1.6% to $82.30 a barrel, while Brent crude was up 1.6% at $88.83 a barrel.

The Commodity Futures Trading Commission will update later on the strength of speculative inflows into crude, at a time when net long positioning is close to its lowest in six years. Baker Hughes will also release its weekly rig count.